Houston-based oil consultant Matt Simmons has stirred controversy by questioning the future ability of Saudi Arabia, the world's largest holder of oil reserves and its top producer, to remain the boundless provider of last resort. Last week he outlined his findings at the Center for Strategic and International Studies in Washington, D.C., in a debate with representatives of state Saudi Aramco -- Mahmoud Abdul-Baqi, vice president of exploration, and Nansen Saleri, reservoir management manager -- who offered a trenchant rebuttal, backed by new data on reserves and depletion. PIW presents the two points of view.

"Technology is part of the problem, not part of the solution," says Houston-based oil analyst Matthew Simmons. "The best technological people in the industry have been misled [into thinking that technology can overcome depletion]," Simmons told PIW on the sidelines of his debate with Saudi Aramco.

Simmons contends that horizontal multilateral wells are very effective at draining most types of oil deposits, but the price of the rapid recovery is a very steep decline rate. In his view this is very pertinent for the situation in Saudi Arabia, the most important producer and ultimate arbiter of global oil markets.

Simmons has undertaken an extensive study of the kingdom's oil fields which has included examining over 200 technical papers, many by Aramco engineers, and has come away with strong misgivings about Saudi Arabia's ability to continue to play its self-assigned role as the producer of last resort for meeting global oil needs. "There is no 'Plan B' for Saudi oil," he says.

His point of departure is the basic geography of Middle East oil. "Middle East oil is different due to its extreme non-diversity," Simmons told his audience. The "five great fields" of Saudi Arabia -- the north part of Ghawar, Abqaiq, Khurais, Safaniya and Zuluf -- account for 90% of Saudi crude production. From his research, Simmons maintains that "all five of these fields have a litany of problems." By way of example, Simmons said that Safaniya has only one main sand, in the north; "Zuluf has a myriad of problems"; and one of the offshore fields, Marjan, is plagued by high hydrogen sulfide content.

But the basic problem with all the fields is water. What Simmons describes as "The Saudi Oil Miracle" has been kept afloat by massive water injection programs at these major fields, directed at very specific sands. Although the kingdom has over 300 recognized reservoirs containing oil, most of them lack the permeability or porosity necessary to ever become major oil producers, he maintains.

Most of the Saudi oil comes from "a sliver of the producing sands" in the country. These slivers have been aggressively attacked with water drive to push oil out of very high flowing oil well bores. Simmons calls water injection the "elixir" for production maintenance that has kept the miracle alive over the past 10 years. In addition to the water injection, there has been a move by Aramco from vertical wells to progressively more advanced horizontal wells, culminating in the current "bottlebrush" multilateral horizontal wells that maximize contact with productive sands within the reservoir. Simmons expects these well bores to soon come under siege both from water below and the gas cap above. Once the major fields start down hill, the miracle will end, or as Simmons puts it, "the era of easy oil is over."

According to a well-worn maxim, if oil fields were royalty, one would usually find the queen field first. In the Saudi case it was Abqaiq -- big but not biggest -- in 1940, with the king, Ghawar, coming along in 1948, to be followed by 8-10 lords and "lots of peons," as Simmons puts it. The north part of Ghawar, which has accounted for 55%-60% of all of Saudi Arabia's crude oil production, is "showing every sign in the world of being almost depleted." And there is "no proof that there is any producible oil [in the eastern flank]." Furthermore, a project in the southern tip of Ghawar's Haradh reservoir "will need 500,000 barrels per day of water to extract 300,000 b/d of oil," according to Simmons, since it has nothing like the permeability or porosity of the north Ghawar reservoirs.

Aramco estimated Ghawar reserves to be 60 billion bbl in 1975 on the basis of 400 wells and a very clear mapping of the oil-water contact, which was enough information for a relatively accurate assessment, in Simmons view. If the 60 billion bbl estimate was near the mark, and with 55 billion bbl now produced, "Ghawar is about to become another Brent, Prudhoe Bay, Samotlor or Yibal," -- a reference to large fields in the North Sea, the Alaskan North Slope, Russia's Western Siberia and Oman, that are all now demonstrably in decline.

Simmons referred specifically to the Yibal experience -- "Oman's ominous omen" -- as an example of being misled by technology's promise to overcome depletion. The once 250,000 b/d producer was to be resurrected by horizontal drilling of maximum reservoir contact (MRC) wells, which are now being used in Saudi Arabia to supplement or supplant now unproductive vertical and earlier generation single-bore horizontal wells. Instead, Yibal production dropped to 90,000 b/d in 2001 and is at about half of that today, Simmons notes.

If Ghawar, the king, gets sick and goes the way of Yibal, "the queen and the lords are also mature," says Simmons. "There are seven other fields that have produced oil, randomly and intermittently -- because there was something cheaper to produce -- and 85 other untested fields -- untested because of no need yet or untested because they lack the physical characteristics [to warrant development]."

The two large fields, Abqaiq and Berri, that produced all the Arab Extra Light grade until Shaybah came on stream in mid-1998, are nearing the end, according to Simmons. Aramco is "sweeping the small pockets of bypassed oil" in these two former giants. Abqaiq peaked in 1973 at 1 million b/d and Berri at 900,000 b/d in 1977. "From some of the recent information on Berri, although they don't quite say this, you can almost see Berri ending up like [Shell's UK] Brent, being produced out as a gas field." Almost all of the oil produced from Safaniya, the world's largest offshore field and Saudi Arabia's second largest after Ghawar, comes from one zone in the northern part of the field and 7-10 other non-producing sands are nowhere near as appealing, as sand control and a growing water cut plague the north, Simmons maintains.

"With global spare capacity all in Saudi Arabia, if the conventional wisdom [about Saudi reserves] is wrong, the world faces a giant energy crisis," he concludes.