Sadad al-Huseini says that global production has reached its maximum sustainable plateau and that output will start to fall within 15 years, by which time the world’s oil resources will be “very severely depleted”.
In an exclusive interview with lastoilshock.com, the former head of exploration and production at Saudi Aramco, said that oil production had reached a structural ceiling determined by geology rather than geopolitics, and that the technical floor for the oil price will rise by $12 annually for the next 4 to 5 years as new fields become increasingly costly to exploit.
According to al-Huseini the technical floor – the basic cost of producing oil excluding factors such as geopolitical risk and hedge fund speculation – is currently about $70 per barrel, meaning the minimum oil price could hit $106 in 2010 and $130 by 2012. Actual crude prices, including financial market factors, could be be as much as $125 by as early as 2010.
Al-Huseini said that Saudi Arabia’s plans to raise production capacity to 12 million barrels per day by 2012 represented “an achievable number”, as the country had announced oil investments of $55 billion between 2003 and 2011. But he cautioned that since some of the new production will come from entirely new fields “how the reservoirs will respond will be determined as they start producing”.
However, al-Huseini disparaged Western expectations that the Kingdom would produce significantly more than 12 mb/d. It was unfair, he said, to expect Saudi to “pull everybody’s chestnuts out of the fire”.