One of the oil world’s longest and best kept secrets may finally be revealed. Saudi Arabia is preparing to unveil how much oil it holds, a closely guarded state secret that has been kept quiet for decades.
The decision to bring such important data to light comes as Saudi Aramco is preparing to partially privatize its assets, an IPO that could bring in some $100 billion. The IPO will be a monumental event, one that the Wall Street Journal says could offer Wall Street some of the largest fees in history.
Saudi Arabia often trades off with Russia – and more recently, with the U.S. – as the world’s largest oil producer. But while it produces at similar levels as Russia and the U.S., it is long been a vastly more influential player in the oil world. That is because of two reasons – the size of its reserves, and the ability to use latent spare capacity to quickly adjust supply, affording it an outsized influence on crude oil prices.
But while everyone believes Saudi Arabia has some of the largest oil reserves in the world, perhaps rivaled only by Venezuela, there has been a lot of uncertainty and skepticism over exactly how much sits beneath the Saudi desert. The world’s largest oil field, Ghawar, has been producing since the 1950s, raising speculation about the longevity of the supergiant oilfield. It alone is thought to hold around 75 billion barrels, and it churns out more than 5 million barrels every single day. Surely, it cannot continue like this indefinitely, but the Kingdom has not revised its official reserves for years, which have stood at 260 billion barrels since the 1980s. It is hard to overstate how valuable this information is, and how fiercely Saudi leadership protected it.
There is a great deal of suspicion regarding Saudi Arabia’s insistence that its reserves still stand at 260 billion barrels. After all, how could such a figure stay constant when it is producing 9 to 10 million barrels every day, which adds up to a few billion barrels each year? Aramco would have to add billions of barrels of newly discovered reserves on an annual basis in order to prevent its reserve base from declining. It is doubtful that it has done that consistently since the 1980s. But nobody knows except the Saudis.
Aramco is preparing to launch the IPO in 2018, which means that it will need to publish data on its oil reserves before then. The oil world’s biggest secret could soon be publicly released.
Full article: Are The Saudis About To Reveal The Best Kept Secret In Oil? (OilPrice)