Gharwar's decline may spook markets and force prices up
Speculation over the actual size of Saudi Arabia's oil reserves is reaching fever pitch as a major bank says the kingdom's - and the world's - biggest field, Gharwar, is in irreversible decline.
The Bank of Montreal's analyst Don Coxe, working from their Chicago office, is the first mainstream number-cruncher to say that Gharwar's days are fated.
Coxe uses the phrase 'Hubbert's Peak' to describe the situation. This refers to the seminal geologist M King Hubbert, who predicted the unavoidable decline of oilfields back in the 1950s.
"The combination of the news that there's no new Saudi Light coming on stream for the next seven years plus the 27% projected decline from existing fields means Hubbert's Peak has arrived in Saudi Arabia," says Coxe, referring to data compiled by the International Energy Association's (IEA) August 2004 monthly report.
About oil fields: the Hubbert Oil Peak isn't when it runs out, it is when it is at the maximum. The biggest oil field discovery, bar none, was this field. It is the longest running field. It is vastly bigger than all others, without exception. The fate of this oil field and the family politics of the Royal Saudis are intertwined very tightly. The inner family struggles for power and the power of this oil are streams of red and black blood.
At this history web site there is a good thumbnail sketch of the basic facts:
Although the Saudi king in 1992 was an absolute monarch in the sense that there were no formal, institutionalized checks on his authority, in practice his ability to rule effectively depended on his astuteness in creating and maintaining consensus within his very large, extended family. The king was the patriarch of the Al Saud, which, including all its collateral branches, numbered about 20,000 people. These persons traced their patrilineal descent to Muhammad ibn Saud, the eighteenth- century founder of the dynasty. The most important branch of the Al Saud family was known as Al Faisal. The Al Faisal branch consisted of the patrilineal descendants of Abd al Aziz's grandfather, Faisal ibn Turki. Only males of the Al Faisal branch of the family, estimated at more than 4,000 in 1992, were considered royalty and were accorded the title of amir (prince).
Even within the Al Faisal branch of the Al Saud family, the princes did not enjoy the same degree of influence. The several lineages within the Al Faisal branch derived from the numerous sons and grandsons of Faisal ibn Turki. His most important grandson, Abd al Aziz, married several women, each of whom bore the king one or more sons. The sons of Abd al Aziz by the same mother (full brothers) inevitably felt more affinity for one another than for their half brothers, and thus political influence within this patrilineal family actually tended to be wielded on the basis of matrilineal descent. Since Fahd's ascent to the throne in 1982, the most influential clan of the Al Faisal branch of the Al Saud family has been the Al Sudairi, known by the patronymic of Fahd's mother. Fahd had seven full brothers, including Minister of Defense Sultan, who was second in the line of succession, Minister of Interior Nayif, and Governor of Riyadh Salman. Sultan and Salman were considered to be Fahd's closest political advisers. In 1983 Fahd appointed one of Sultan's sons, Bandar, to be the Saudi ambassador to the United States. Another of Sultan's sons, Khalid, was the de facto commander of Saudi armed forces during the Persian Gulf War. At least once a week, the king and his full brothers met for a family dinner at which they shared perspectives about national and international politics. In addition to his full brothers, seven of Fahd's half brothers were sons of other Al Sudairi women whom his father had married. As the sons of Fahd and his brothers matured and assumed government responsibilities during the 1980s, some Saudis began to refer to the clan as Al Fahd instead of Al Sudairi.
The Al Thunayyan clan was closely allied to the Al Sudairi. King Faisal's favorite wife had been from the Al Thunayyan, a collateral branch of the Al Saud family that had intermarried with the Al ash Shaykh ulama family. During the Al Saud crisis that culminated in the 1964 deposition of King Saud, the Al Sudairi consistently supported Faisal. Because Faisal had no full brothers, he tended to favor those of his half brothers who had backed him during the prolonged political struggle with Saud. For example, Fahd, Sultan, and Nayif all received important ministerial positions from Faisal when he was crown prince (1953- 64) and for much of that period Saud's prime minister. Following Faisal's assassination in 1975, Fahd, the eldest of the Al Sudairi brothers, was named second in the line of succession. Before becoming king in 1982, Fahd served as King Khalid's de facto prime minister and used his influence to obtain ministerial-level appointments for Faisal's sons. One son, Saud ibn Faisal, was named minister of foreign affairs in 1975.
First, this is a problem when you have many wives. Family trees are more like thickets. My parents knew King Faisal. In 1974, my parents lived in Saudi Arabia. My father was working with the King to develop a university system and my father loves talking about the Hubbert Oil Peak and how the kingdom ought to control the pumping of the oil so they could fix things so when the oil eventually runs out, Saudi Arabia would be self sufficient thanks to solar energy! This idea appealed to the king.
A year later, this severe, thin aesthetic man was slain by a relative. Interesting stuff from the BBC:
One of the king's bodyguards hit the prince with his sword, although it was still sheathed.
Oil minister Sheikh Yamani is reported to have shouted to the guard not to kill the prince.
Notice also, the nephew was chatting with the Kuwaitis before assassinating his own HALF uncle.
Here is some interesting news about Yamani:
Business Week interview:
It's hard to think of anyone with a richer history in the oil industry than Sheikh Ahmed Zaki Yamani. As Saudi Arabia's Oil Minister from 1962 to 1986, he was a key player in the first oil crisis following the 1973 Arab-Israeli war. And he was around to see production plummet in the late 1980s, as prices in the $30-plus per barrel range killed off world demand. Since 1990, he has been watching the oil markets and OPEC from his London think tank, the Center for Global Energy Studies (CGES).
Yamani, now in his mid-70s, was his usual quietly provocative self as he held court at a CGES conference in London on Mar. 22. The goateed former oil supremo blamed Saudi Aramco, the Saudi National Oil Company, for thwarting a recent effort led by Saudi Foreign Minister Saud Al Faisal to bring international oil companies back into the Kingdom to explore anew for oil.
This would seem like just another 'odd thing' except recently, the entire royal family was killed in Nepal by a relative, seemingly, and the American pet, the 'evil brother' who was disliked by the people, took over. So it isn't 'odd' at all. Fahd is a fat man, quite the opposite of his half brother. The clan side that took over now runs the joint and they keep power by using the Americans as their Praetorian Guard. Even within this conspiritory nest of Byzantine intrigues runs other forces such as the royal pets, the bin Laden clan. We know their name thanks to Osama's efforts.
All of this surrounds the oil business. The Saudis keep power via a vicious police state that keeps the population under control while at the same time, the rulers run wild across the planet, living very unreligious lives, even as they still maintain their dignity as the face of the Muslim religion, world wide. They have Mecca.
Osama is very similar in appearance to former King Faisal. The same lean, dark eyed look. He wants Mecca. He knows the road to Mecca lies through the Gharwar Oil Fields.
The news that these fields now, since they have to hydrate it a great deal to pump, thanks to the lack of natural pressure, are beginning to fail will delight him, for he doesn't want oil, he wants an end to the oil. He views the oil as a curse on the people for it is destroying Islam even as it makes them rich.
Saudi Arabia parties while the oil flowed. They are utterly unprepared for the coming time of no more oil. In the next fifty years, as the oil dwindles, they will still be rich, but only if they can stay alive. As everyone goes after the oil and the wealth, they will be hard pressed to keep their grip on this. Note that this year, there have been fairly frequent bombs going off and gun battles, the last of which was just a few days ago.
House of Bush/House of Saud is an important read if you want to see how these two clans and the bin Ladens intersect. Every American should have read this book before the last election but they didn't. I also suspect, many Americans thought this relationship would bring us cheap oil. The Saudis do manipulate the price of oil but it is no longer in their hands. This is because they are pumping as fast as they can and it is now slipping away from their control. Soon, geological reality will determine how many barrels of oil they pump.