| Mr. Verrastro: Good morning and welcome. My
name is Frank Verrastro. I'm the Director of the Energy Program here
at CSIS. I'd like to
thank you all for coming. We have an extremely important and topical
discussion today and I won't bore you with the details of some of
the infomercials for starting here, but I want to take a couple of
minutes at the outset just to tell you how we see this program
fitting in with our overall energy effort here.
After going
through war in the Middle East and having electricity crises,
blackouts on both coasts. We're talking about LNG and natural gas
shortages. We've seen a ride up in gasoline prices. We decided we
needed to reorient the program here so that we took at the same time
both a strategic look at supply and then maybe a more
forward-looking take on our energy futures. That's basically what we
decided to do. We've developed a bifurcated approach where on the
one hand we're looking at strategic energy and security of supply
along with global geopolitics and at the same time we want to spend
some time looking at things like environment and technology and
energy futures.
Many of you
over the course of the past couple of months have attended sessions
here dealing with Iraq, securitization of Iraqi oil or Iraq
electricity. We co-sponsored with the Africa and Middle East
programs here an effort looking at the reintegration of Libya and
rogue states under Jon Alterman's Prodigal States Initiative. Our
expectation is that in the future we're going to be looking at
things like LNG, Russian oil supply and infrastructure and Chinese
demand. But the session that we have here today seems to encompass
almost all of the pieces we have in the program and that's why I
think it's extremely important to use this as a kickoff event. We're
going to be touching on this morning issues of security, of supply,
and strategic initiatives. Obviously we'll talk about global
geopolitics. At the same time you're going to hear a lot about
technology. In the end, this is all going to develop our alternative
energy futures and what we see as important.
[Administrative
remarks]
Mr. Ebel: Let me put a couple of
questions to you. Whether the global oil supply can keep pace with
growing world oil demand is being questioned in some circles. Some
of you may have been present here last June 17th when we
hosted a workshop entitled "Cresting the Petroleum Peak: When
Supply Can No Longer Meet Demand." We have a gentleman with a
camera in the back who I co-hosted that session with.
The idea was
to provide an opportunity for those who were convinced that the
world was indeed creating the petroleum peak to lay out their
rationale, to lay out their arguments, so that we could make our own
judgments as to the validity of their findings. We are following the
same philosophy this morning as we look at the future of Saudi oil.
We don't need
to dwell on the importance of Saudi oil, either to the United States
or to the world oil market, but I would emphasize at least in my own
opinion that the importance of Saudi oil is based as much on its
spare producing capacity as it is on its position as the world's
leading exporter.
Even more so
in times of supply disruptions such as the military intervention in
Iraq last year which took Iraqi oil off the market. Saudi Arabia
advised the United States that its spare producing capacity which at
present I would put at around two million barrels of oil a day, they
were prepared to put that spare capacity to work to offset the loss
of Iraqi oil, and therefore the United States did not need to take
the step of tapping into our strategic petroleum reserve. They did
and we didn't.
Who might
ever rival Saudi Arabia in terms of production, exports, and most
importantly, spare capacity? Not Russia. Even though Russian oil
production this year is on track to probably average nine million
barrels of oil a day, giving that country worldwide leadership. The
prospect must be considered that at some point in time Russia might
replace Saudi Arabia as the leading oil exporter, but Russia is
unlikely to ever deliberately develop spare producing capacity.
Iraq could
replace Saudi Arabia, at least in the minds of some of the Iraqis
that I have worked with. In their minds a broad and successful
exploration and development program plus raising the depletion rate,
currently around one percent to four to five percent would do it, so
they say. Taking Iraqi oil to as much as 12 million barrels of oil a
day. But when? Certainly not this decade, and not without foreign
investment. Moreover, might
Iraq
ever financially justify the establishment of spare producing
capacity? I find that outside the realm of reality.
Nations are
prisoners of geography and no one nation enjoys in full fashion all
the fruits that geography can bestow. Some by accident of nature are
rich in energy resources but find themselves lacking in other
strengths. Some are dynamic in all the virtues we may respect, but
poor in natural resources. This makes for a shrinking and
increasingly interdependent world.
At the same
time it makes for conflicts among nations as each seeks to maximize
its strengths and minimize its weaknesses while preserving and
hopefully enhancing its stature among its peers.
It is out of
this conflict that the issues of the past and of the future emerge.
Now let me
turn to the theme of this morning's gathering, the future of Saudi
oil production against the background of a somewhat worrisome
thought that there is no substitute for Saudi oil.
[Remarks
omitted]
Mr. Verrastro:
I'm delighted this morning to
have with us two senior executives from Saudi Aramco. Mahmoud Abdul-Baqi
is Vice President of Exploration, and to his left is Dr. Nansen
Saleri who is Manager of Reservoir Engineering.
Mr. Abdul-Baqi
has been responsible for overseeing exploration for oil and gas
activity and the geoscience of the world's largest reservoirs. He's
been with the company for over 30 years and during that span has
held positions as Chief Exploration Geologist and Chief Reservoir
Engineer. He was elected to his current position in 1991. He has a
degree in geology as well as completing the Executive Management
Program at Georgetown University Law Center and the Enterprise
Management Program at Columbia University. He's a Founding Member of
the Dhahran Geoscience Society, an Honorary Member of the American
Association of Petroleum Geologists, the Society of Petroleum
Engineers and the Society of Exploration Geophysicists. He's a Past
President of the AAPG for the Middle East region and serves as a
member of both the Saudi Aramco Executive Advisory Committee and on
the Board of Directors of the Arabian Drilling Company.
Dr. Nansen
Saleri, Manager of Reservoir Management at Saudi Aramco where his
primary responsibilities are to oversee the company's reservoir
management activities for oil, gas and condensates reserves, and for
fulfilling its production in maximum sustained capability
commitments. In his 12 years with the company Nansen has either
chaired or co-chaired a number of key strategic program initiatives
including the Gas Development Strategy Task Force, the Drilling
Reengineering effort, the Best In Class Strategic Imperative in Well
Optimization, and spearheaded the company's efforts in maximum
reservoir contact and next generation wells, some of which you'll
hear about today.
Prior
to joining Saudi Aramco Dr. Saleri spent some 18 years with Chevron
where he served as Manager of Reservoir Engineering and as Principal
Instructor for Chevron's Reservoir Management Schools. He holds his
Master of Science and PhD degrees in Chemical Engineering from the
University of Virginia. He serves on the Advisory Board of Petroleum
Engineering at the University of Houston. He's authored a variety of
technical papers, has been an SPE Distinguished Lecturer, and is a
frequent presenter and keynoter at technical conferences throughout
the world.
Gentlemen,
welcome.
Before
turning over the podium to Mr. Abdul-Baqi, two clarifying notes.
Please understand these speakers are executives of Saudi Aramco, the
company. They do not represent the Ministry or the government of
Saudi Arabia so when you frame your
questions,
keep that in mind.
Also note,
and I was reminded of this, when you address your questions please
identify to whom you want the question addressed to. Otherwise we'll
address it to the panel.
Mr.
Abdul-Baqi.
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