Oil Report

UPDATE 2-Saudi Arabia says easy oil is not over-Naimi

*Saudi says easy oil not over

*No need for Saudi to deplete reservoirs at a fast rate

(Updates throughout)

RIYADH, Oct 18 (Reuters) - Saudi Arabia’s oil minister said on Monday the age of easy oil was not over as the kingdom still holds at least 88 billion barrels of oil in its largest oilfield.

“I am sorry to disappoint people, easy oil is not over,” Ali Al-Naimi told reporters in Riyadh on the occasion of OPEC’s 50th anniversary.

“How can you say that easy oil is over, when we still have over 88 billion (barrels) in the Ghawar field...You can dismiss that notion that easy oil in Saudi Arabia is gone,” he added.

Ghawar, the world’s largest onshore oilfield has been in production since 1951.

Proponents of the theory that global oil output is at or near its peak have said Saudi reserves may be less than stated and that fields like Ghawar may be under strain.

Some analysts believe the age of easily extracted oil is over, which is driving companies to search for more costly supplies deep under the sea or trapped in shale sand and boost investment in heavy oil.

Each barrel of oil equivalent cost an average of just over $3 to discover last year, compared with just $1.18 in 2001, according to upstream consultant Wood Mackenzie.

Saudi Aramco is undertaking a $16 billion development at its Manifa offshore oilfield. The field would pump 900,000 barrels per day (bpd) of heavy crude by 2024. [ID:nLDE65E1QY]

Naimi said the development of Manifa will allow the kingdom to tap into heavy oil production and was not a signal to the end of the easy oil age.

“That is one of the reasons but we also need it for new refineries that are built.”

Asked about depletion rates in fields, Naimi said the kingdom has sufficient production capacity at 12 million barrels per day (bpd) and has a strategy of preserving its resources and developing new sources of energy.

“We have the production capacity and we don’t have to deplete our reservoirs as fast as someone who’s just there for we don’t really have to pull our reservoirs as hard as we should,” Naimi said.

The kingdom had reached a production rate of up to 70 percent at some of its fields.

Naimi said the world would remain dependent on fossil fuels for at least 50 years and reiterated his country was looking into other forms of energy.


For now Naimi said the market is balanced and a price range between $70-80 per barrel was fair to both consumers and producers, giving no indication on what action could be taken in OPEC’s next meeting in December.

In 2008, oil prices rallied to over $147 a barrel driven by speculation and a weak U.S. dollar. Over the past decade, OPEC has shifted its policy from leading the price to acting as a balancing factor to the market, said OPEC’s secretary general, Abdulla al-Badri, at the press conference.

“For the past year and a half the price has not been far away from the market fundamentals, there is some speculation, I can’t tell you how much, but OPEC does not dictate the price anymore,” Badri said.

Oil prices rose above $83 a barrel on Monday, the biggest percentage gain in two weeks, as the dollar pulled back from early gains.

Editing by Sofina Mirza-Reid