WASHINGTON, 26 February 2004 — Experts are always in ready supply in Washington. But Tuesday’s briefing analyzing Saudi Arabia’s energy future surprised many with its large turnout of many of these Washington experts.

The lure was the combination of assembled talents including Matthew Simmons, CEO of Simmons and Co. International, a key oil adviser to the Bush Administration and an energy investment banker with an investment portfolio of approximately $56 billion.

Simmons is known for two seemingly contradictory things: He’s a staunch supporter of George W. Bush and his policies, and is probably the only outspoken insider to talk openly about Peak Oil. His presentation focused on what he called the “Saudi Oil Miracle,” and whether it has - you guessed it - peaked.

Aramco sent in two of its top-notch authorities in the field: Mahmoud Abdul-Baqi, Aramco’s vice president of exploration; and Nansen Saleri, Aramco’s manager of reservoir management. Their detailed presentations aimed to assure the audience that Saudi Arabia was not on the brink of an energy crisis, prices would remain stable and that its oil production was doing just fine.

Simmons set the ball rolling, saying: “Everyone’s ‘plug’ factor for future energy growth is Saudi Arabia’s ability to increase its oil flow, but if this premise is wrong, the world is in store for a nasty shock.”

The world should worry about energy adequacy because energy is the world’s most precious resource and may have peaked, Simmons told the audience at the Washington-based Center for Strategic & International Studies.

Nobody noticed when US and Canadian natural gas supplies peaked, he said. “The North Sea peaked and this went unannounced.”

Focusing on Saudi Arabia, Simmons said all of its super giant oil fields were now “extremely mature.” Its five super giant oil fields were discovered between 1940 and 1965, and these produced approximately 90 percent of all Saudi oil.

Twenty percent of the world’s oil supply comes from 14 fields averaging almost 60 years since discovery, he said.

“The small number of great but old oil fields in Saudi Arabia that created ‘The Miracle’ are now facing challenges. The ‘easy oil era’ is over,” said Simmons.

Ghawar, the world’s largest oil field, was discovered from 1948-1952, and Ghawar’s oil has accounted for the production of 55 to 60 percent of all Saudi oil. Shaybah, Saudi Arabia’s last giant oil field was discovered in 1967.

The fear is that these elder oil fields may have peaked and nearing “an end.” Once giants peak, most soon begin a steady decline, he said, adding without explanation that “peaking” should not be confused with running out of oil.

The next generation of Saudi oil will be harder to extract, he said. Many by-passed oil pockets remain and reservoirs above and below the prime producers can extract oil, but with more difficulty. He urged the development of these small, untapped fields should start soon.

His greatest worry hovers around the Saudi energy ‘miracle.’ “The entire world assumes Saudi Arabia can carry everyone’s energy needs on its back. But if this turns out not to work, there is no ‘Plan B.’ And if conventional wisdom is wrong, the world faces a giant energy crisis.”

Abdul Baqi and Saleri gave a decidedly different perspective on where Saudi Arabian oil is heading in the next 50 years.

Saudi Arabia is expected to continue its central role in the Middle East, not only because of its major oil reserves, but also because “it has operating oil companies with a proven track record of overcoming challenges, and an excellent sustained performance” said Abdul Baqi.

There is also a lot of land to explore with the potential for more oil and gas,” he said, adding, “many respected entities throughout the world” agree with Aramco on this issue.

In the last ten years, Aramco has drilled 64 exploratory wells, with the success rate of 52 percent, he said. “This is very high by industry standards, and the company has been equally successful drilling both oil and gas.” Saleri spoke reassuringly and at length about discovered oil resources, and Aramco’s reservoir management rules. “If you produce things slowly, you can expand the life cycle, which is significant as you can use developing techniques.”

Aramco has invested heavily in state-of-the-art technology. They have, according to Saleri and Abdul Baqi, advanced seismic imaging with a higher resolution than other companies, which allows them to pinpoint drilling.

Aramco’s 48 drilling rigs can communicate directly with its engineers in Dhahran, Saleri said. Their direct communication with the drilling rigs enables them to see within a one-foot resolution.

Responding to Simmons’s worries about Shaybah oil field, Saleri said its oil depletion rate is one percent per year, and its production is expected to plateau after 50 years. “We also have the capability of going to higher production of two percent if there’s a world energy crisis, which is roughly the oil production of all Texas, and we feel we can maintain it for 25 years, or more.”

In conclusion, Aramco plans to maintain a production capacity of 10 million barrels a day. Saleri said it has the “capacity and commitment to continue as a cost effective global oil supplier with sustained production levels at 10, 12 and even 15 million barrels per day, until well beyond 2054.”

Amarco also denied allegations that oil prices would rise drastically because of the difficulties with extractions.

“We may eventually see some rise in cost, that is undeniable, but don’t believe there will be an abrupt change,” said Abdul Baqi. “The worse case scenario would be a very moderate change in cost 10 to 15 years down the line.”