Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy [Hardcover]

Matthew R. Simmons (Author)

Book Description

Publication Date: June 10, 2005

Twilight in the Desert reveals a Saudi oil and production industry that could soon approach a serious, irreversible decline. In this exhaustively researched book, veteran oil industry analyst Matthew Simmons draws on his three-plus decades of insider experience and more than 200 independently produced reports about Saudi petroleum resources and production operations. He uncovers a story about Saudi Arabia’s troubled oil industry, not to mention its political and societal instability, which differs sharply from the globally accepted Saudi version. It’s a story that is provocative and disturbing, based on undeniable facts, but until now never told in its entirety. Twilight in the Desert answers all readers’ questions about Saudi oil and production industries with keen examination instead of unsubstantiated posturing, and takes its place as one of the most important books of this still-young century.

Editorial Reviews

From Booklist

Investment banker Simmons offers a detailed description of the relationship between Saudi Arabia and the U.S and our long-standing dependence upon Saudi oil. With a field-by-field assessment of its key oilfields, he highlights many discrepancies between Saudi Arabia's actual production potential and its seemingly extravagant resource claims. Parts 1 and 2 of the book offer background and context for understanding the technical discussion of Saudi oil fields and the world's energy supplies. Parts 3 and 4 contain analysis of Saudi Arabia's oil and gas industry based on the technical papers published by the Society of Petroleum Engineers. Simmons suggests that when Saudi Arabia and other Middle East producers can no longer meet the world's enormous demand, world leaders and energy specialists must be prepared for the consequences of increased scarcity and higher costs of oil that support our modern society. Without authentication of the Saudi's production sustainability claims, the author recommends review of this critical situation by an international forum. A thought-provoking book. Mary Whaley
Copyright © American Library Association. All rights reserved

Review

“…a must read for anyone concerned with our culture of ‘conspicuous consumption’” (Lobster, Winter 2005/06)

“…a realistic look at the future of Saudi Arabian oil supplies” (Wexus, 7^th December 2005)

"The Texas energy specialist, Matthew Simmons, has suggested that the world derives false comfort from the Saudi Arabian assurances of willingness to increase production to meet consumer shortfalls." (Financial Times, 16^th September 2005)

"Oil industry expert Matthew Simmons thinks...claims and forecasts are exaggerations and unrepresentative...the book goes into good detail..." (Lloyds List, 26th August 2005)

"...an analyst who is warning that the end of booming oil production is nigh, or already upon us..." (The Business, 4^th September 2005)

"This book by Matthew Simmons comes at a timely moment...[and is] therefore essential reading for industry, government, the investment community and academia. It has a message for everyone." (Times Higher Education Supplement, 9^th September 2005)

"...there are many valuable insights in Simmons' book. His basic points are right on target." (BusinessWeek, August 1, 2005)

"...This is a ground-breaking book by an analyst of unimpeachable authority..."  (New Statesman, 25 July 2005)

In 1956, Shell Oil geologist M. King Hubbert discovered a grand illusion in the American oil industry. For tax purposes, he noted, American oil companies regularly delayed the declaration of new oil reserves by years and even decades. The result was a false impression that new oil was being found all the time. In fact, discoveries had peaked in 1936.
Based on this observation, Mr. Hubbert predicted that American oil production would peak in 1969. He was wrong by one year. We briefly produced 10 million barrels a day in 1970 but have never hit that level since. Even with the addition of Prudhoe Bay, Alaska, American production has slipped to eight million barrels a day -- which is why we import 60% of our oil.
Across the oil industry, the uneasy feeling is growing that world production may be approaching its own "Hubbert's Peak." The last major field yielding more than a million barrels a day was found in Mexico in 1976. New discoveries peaked in 1960, and production outside the Middle East reached its high point in 1997. Meanwhile world demand continues to accelerate by 3% a year. Indonesia, once a major exporter, now imports its oil.
The Saudis claim to have huge oil reserves. Do they really?
Before an uneasy feeling grows into full-blown pessimism, however, one must consider the supposedly vast oil resources lying beneath Saudi Arabia. The Saudis possess 25% of the world's proven reserves. They routinely proclaim that, for at least the next 50 years, they could easily double their current output of 10 million barrels a day.
But is this true? Matthew R. Simmons, a Texas investment banker with a Harvard Business School degree and 20 years' experience in oil, has his doubts. In "Twilight in the Desert" (John Wiley & Sons, 422 pages, $24.95), Mr. Simmons argues that the Saudis may be deceiving the world and themselves. If only half of his claims prove to be true, we could be in for some nasty surprises.
First, Mr. Simmons notes, all Saudi claims exist behind a veil of secrecy. In 1982, the Saudi government took complete control of Aramco (the Arabian American Oil Co.) after four decades of co-ownership with a consortium of major oil companies. Since then Aramco has never released field-by-field figures for its oil production. In fact, no OPEC member is very forthcoming. The cartel sets production quotas according to a country's reserves, so each member has reason to exaggerate. Meanwhile, OPEC nations are constantly cheating one another by overproducing, so none wants to publish official statistics.
As a result, the world's most reliable source for OPEC production is a little company called Petrologistics, located over a grocery store in Geneva. Conrad Gerber, the principal, claims to have spies in every OPEC port. For all we know, Mr. Gerber is making up his numbers, but everyone -- including the Paris-based International Energy Agency -- takes him seriously, since OPEC produces nothing better.
The Saudis, for their part, obviously enjoy their role as producer of last resort and feel content to let everyone think that they have things under control. Yet as Mr. Simmons observes: "History has frequently shown that once secrecy envelops the culture of either a company or a country, those most surprised when the truth comes out are often the insiders who created the secrets in the first place."
Mr. Simmons became suspicious of Saudi claims after taking a guided tour of Aramco facilities in 2003. To penetrate the veil, he turned to the electronic library of the Society of Petroleum Engineers, which regularly publishes technical papers by field geologists. After downloading and studying more than 200 reports by Aramco personnel, Mr. Simmons came up with his own portrait of Saudi Arabia's oil resources. It is not a pretty picture.
Almost 90% of Saudi production comes from six giant fields, all of them discovered before 1967. The "king" of this grouping -- the 2000-square-mile Ghawar field near the Persian Gulf -- is the largest oil field in the world. But if Saudi geology follows the pattern found elsewhere, it is unlikely that any new fields lie nearby. Indeed, Aramco has prospected extensively outside the Ghawar region but found nothing of significance. In particular, the Arab D stratum -- the source rock of the Ghawar field -- has long since eroded in other parts of the Arabian Peninsula. The six major fields, having all produced at or near capacity for almost 40 years, are showing signs of age. All require extensive water injection to maintain their current flow.
Based on these observations, Mr. Simmons doubts that Aramco can increase its output to anywhere near the level it claims. In fact, he believes that Saudi production may have already peaked. Is he right?
Mr. Simmons's critics say that, by relying on technical papers, he has biased his survey, since geologists like to concentrate on problem wells the way that doctors focus on sick patients. Still, the experience in America and the rest of the world shows that oil fields don't last forever. Prudhoe Bay, which was producing 1.2 million barrels a day five years after being brought on line in 1976, is now down to less than 400,000.
The mystery of Saudi oil capacity bears an eerie resemblance to Saddam Hussein's apparent belief that his scientists had developed weapons of mass destruction. Who are the deceivers and who is the deceived? No one yet knows the answers. But at least Matthew Simmons is asking the questions. (Wall Street Journal, June 28, 2005)

See all Editorial Reviews

Product Details

• Hardcover: 448 pages
• Publisher: Wiley; 1 edition (June 10, 2005)
• Language: English
• ISBN-10: 047173876X
• ISBN-13: 978-0471738763
• Product Dimensions: 6.6 x 1.4 x 9.2 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 4.2 out of 5 stars  See all reviews (112 customer reviews)
• Amazon Best Sellers Rank: #229,777 in Books (See Top 100 in Books)
  • #49 in Books > History > Middle East > Saudi Arabia
  • #90 in Books > Business & Investing > Industries & Professions > Oil & Energy

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Most Helpful Customer Reviews

231 of 247 people found the following review helpful

5.0 out of 5 stars bad news from the SPE, via a Texas investment banker June 16, 2005

By Autonomeus VINE™ VOICE

Format:Hardcover

Matt Simmons has bad news about Saudi oil, very bad. Who is Matt Simmons? He's a Houston investment banker who specializes in oil. He's a member of the National Petroleum Council and the Council on Foreign Relations. Not a radical environmentalist, in other words, quite the opposite. What Simmons has done in TWILIGHT IN THE DESERT: THE COMING OIL SHOCK AND THE WORLD ECONOMY is to analyze the technical papers of the Society of Petroleum Engineers (SPE) on Saudi oil, shining a light behind the veil of secrecy that has shrouded it since OPEC stopped reporting oil production data in 1982. In short, what the SPE reports reveal is that the official Saudi claims for reserves and production capacity are vastly overstated. Further, tragically, it seems that the fields have been mismanaged, making it unlikely that all the oil will ever be recovered.

Now someone with a suspicious mind might suspect that Simmons, a banker, has an interest in leading the market to believe that oil is scarce, because that will put upward pressure on the price, and the oil companies and he, their banker, will benefit. I do have a suspicious mind, but I am convinced by Simmons's meticulous presentation of the SPE data. It is probably the single most important piece of evidence that the world is entering the Hubbert's peak for oil ("peak oil" as it is colloquially and ungrammatically known). He systematically presents the data on every single big Saudi oilfield, from the biggest of all, Ghawar, which as of 1994 still produced 63% of all Saudi oil, through Abqaiq, Safnaya, Berri, Zulaf, Marjan, Shaybah, and smaller fields.

Are there vast untapped reserves in Saudi Arabia? According to the SPE data, the answer is no. No giant fields have been discovered since 1968, despite intensive exploration. Here is a list of crisp facts about world oil, according to Simmons (p. 331):

1) Only a handful of super-giant oilfields have ever been discovered in Saudi Arabia and the Middle East -- they represent a very significant portion of all ME oil, and they are all very mature.

2) All mature giant oilfields peak and decline (production profiles showing the peaks are shown for 8 fields in Texas, Alaska, the North Sea, and Russia). Implication: sophisticated new technology will not prevent or forestall this from happening.

3) There do not seem to be many giant oilfields left to be discovered in Saudi Arabia or the ME.

4) Non-OPEC oil, excluding the FSU (former Soviet Union) seems to be peaking, or has already peaked.

The consequences of all this, needless to say, are grim. It's been increasingly clear in recent years that oil had peaked everywhere else, but there was still supposed to be a vast reserve under the Saudi sands. Apparently this was a mirage. What this means is that we have to make the development of new energy sources the top priority! Of course, in the middle to long-term, it will have to be renewable energy, and the faster we move to solar, wind, and biofuels the better (See Hermann Scheer's excellent THE SOLAR ECONOMY.) In the transition, which is likely to be a rough ride, other less desirable alternatives are all but inevitable. Balancing available inputs (ie, plentiful coal) with toxic outputs and global warming will be a Faustian bargain. One thing we must demand here in the U.S. is an immediate major increase in the CAFE -- corporate average fuel economy, the standard for fuel efficiency. There is no reason it shouldn't be raised to 40 MPG in a few years. CAVEAT EMPTOR!

For more vital resources on this topic, see my THE CLEAN/RENEWABLE ENERGY REVOLUTION list.

127 of 137 people found the following review helpful

5.0 out of 5 stars What If The Pumps Run Dry June 12, 2005

By John G. Hilliard

Format:Hardcover

The basis of this book is fear, not unwanted fear spread by the author, but it is the emotion you start to feel as you move through the book page by page. For good or bad the U.S. and the world have become reliant on one natural resource that is controlled by a very few countries and people. This fact alone should have most of us concerned, 60% of the oil we use each day is controlled by a bunch of countries that are primarily dictatorships surrounded by people that would sooner burn the oil in mass dumping grounds instead of selling it to us regardless of the price. We have become backed into a corner and it appears that our only response so far as been to flex our power.

What will happen if the oil fields in Saudi can not keep up with demand? What if the production facilities are almost overmatched at this point and further facilities are difficult to put in place? All of these and more questions are covered in this book. The author also talks about the populations and political situation in Saudi and the picture he presents is another difficult and concerning one at that. One can only hope that the production in Iraq gets up and running or that better technology is hurried into production.

The footnotes and documented sources detailed in the book give it the appearance of a very well documented and accurate study. The details on the production process in Saudi is worth the price of the book alone. It is a rather back handed slight at our news media that the very real issues presented in this book have not yet made it to the talking heads at 6 pm. Overall I enjoyed the book a great detail. It is well written and put together. The reader is never lost in the detail no matter how little previous knowledge the reader has about the oil business. What I found was that the good was a very fast read given that it is difficult to put it down. It is a book that we all need to read.

36 of 37 people found the following review helpful

5.0 out of 5 stars Well Written - Very Detailed November 27, 2005

By J. Robinson

Format:Hardcover

This is a well written and well researched book by Mathew Simmons, an expert on the oil business including Middle East oil supplies. The book is a bit technical and is mostly solid information on oil extraction, the oil fields of Saudi Arabia, along with a number of projections. The best comparison that I can make is with a university reference book, but not a text book: it is a well written reference book with a very short introduction of Saudi history.

The book is a little over 400 pages in medium font, and has many maps showing the locations of the oil, schematics showing how the crude oil is actually processed, photographs, and a number of tables. There are about a dozen large oil fields in Saudi Arabia. These fields are discussed, and comparisons are made with other large active oil fields around the world, including the North Sea oil fields started in the early 1970s. The core idea of the book is that we are about to face the reality of limited oil production in Saudi Arabia and in the rest of the Middle East: the situation is not good and projected inventories and extraction rates are too optimistic. The era of growing sources seems to be over, regardless of the political situation in the Middle East. The sources cannot keep up with the demand for oil that is expected to continue to grow.

The book is divided into four sections and then has a very short appendix. The first section is just 69 pages and details the political and historical development of Saudi Arabia as a country, and the introduction of foreign oil companies.

Section two is short, just 50 pages, and covers the subject of how the oil is extracted from the ground, and what has to be done to separate the crude from water, methane, and various other contaminants to get "pure oil". This includes photographs and a number of process schematics. It goes step by step through from the discovery of a field to how the oil is actually extracted and processed, and this can differ for different stages in the life of an oil field.

Section three is the heart of the book. It is a long inventory and description of about a dozen Saudi oil fields with maps and comments. This is one of the biggest sections and takes up 110 pages. He goes through the inventory field by field explaining the size, location, problems, yields, lifetimes, etc. This is a relatively complete description of the Saudi oil situation and oil around the Middle East, in more general terms for the latter and a bit less detailed.

The last section is about 100 pages and he describes the life cycles of various oil fields to show how the oil extraction rate varies with time. Each field goes through a life cycle, sometimes lasting decades, but each has a finite cycle length and each follows a similar production trajectory, i.e.; a slow rise in output at first to a maximum rate, then a peaking, then a drop off. The author has a lot of detailed information on many oil fields from around the world, along with their production histories. Most fields around the globe are on the down slope.

Finally, he has a brief appendix with additional comments to show that the problem with the Saudi fields is an old problem, and he quotes past Congressional testimony and similar, going back from 1974 that back up his present case. The problem is not new. Saudi production is limited and the inventory figures are overly optimistic, and they have a history of being overly optimistic: production is just half of old projections, and raising production levels is not feasible.

The general thrust of the arguments is that the fields are running at near capacity, will peak soon, and then drop off. They will not last centuries or similar. The date is a bit hazy, but with exponential growth in demand it will be sooner rather than later, probably the first decade of the present century, or maybe even this year or in the next few years. At that point we will not be able to meet oil demands, especially for the emerging nations of China and elsewhere.

In summary, once the hype and opinion clears away, and the basic facts are considered, the oil situation is not good. Many economists, most politicians, and the general public have still failed to grasp that an oil based economy cannot be sustained indefinitely because of finite supplies - not taking into account whether carbon dioxide will destroy the atmosphere. Like lung cancer and smoking, there has been a long period of denial and a lack of any real effort to conserve oil or find an alternative. In any case, this book drives the point home - in spades - and with much technical detail. We are about to peak in Saudi oil production, and there are no alternatives. The tap will not be 100% turned off, but supply will peak, decrease, and not the meet demand; our economies and the use of the gasoline, jet fuel, natural gas, or diesel fuel will have to change sooner, not later. Few think that coal is a good solution, and the much promoted two step "clean-coal" has yet to be demonstrated, i.e.: step one works - the high temperature burring of coal, but step two, an effective method of sequestering the carbon dioxide is not proven. The latter is my comment.

This is a well researched and well written book that outlines serious future oil shortages. 5 stars.