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Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy Hardcover – June 10, 2005
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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
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“…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, 7th 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, 16th 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, 4th 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, 9th 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)
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Top customer reviews
Mr Simmons book was predominantly researched in 2004, however his findings are more relevant today than 7 years ago. This book predominantly takes a look at Saudi Arabia's oil exploration & production history & the likelihood of increased/plateaued oil production in the future. Mr Simmons takes a deep look into the Society of Petroleum Engineers (SPE) technical reports on Saudi Arabia. Putting it simply, Saudi Arabia has a handful of super giants & giants, namely: Ghawar, Abqaiq, Safaniya, Berri, Marjan, Zuluf & Shaybah. All of these fields started producing in the 40s, 50s & 60s except for Shaybah whose oil production started in 1998. These are old, tired & ever maturing fields. All of these oil fields were discovered a long time ago & the last major oil discovery was Shaybah in 1967. Saudi Arabia has already reached peak oil in 1981, however this was an artificial peak as Saudi Arabia was acting "responsibly" during the Iranian revolution & the beginning of the Iraq-Iran war by increasing production to make up for the shortages from these nations. Iran peaked in oil production in 1978 at 6 million barrels a day & is now only producing 3-3.5 million barrels a day.
Mr Simmons goes deeply into the process of oil production & how important it is to retain pressure in the fields to keep from the fields peaking prematurely. The author also goes into detail about the decision to either maximise the ultimate recovery of the reserves versus maximising return on investment from the field, which is usually not aligned together. Mr Simmons also explains why the artificial increase in production during 1979-1981, may have caused irreversible damage to the oil fields that will never be known. Mr Simmons also discusses Saudi Aramco's ambitious & over optimistic claims that they can in the near future produce 15 million barrels a day & maintain this output for 50 years. Mr Simmons also goes into other super giant & giant oil fields around the world & how they declined.
The University of Kuwait came up with an analysis of global oil production in 2010 projecting that OPEC production will not peak until 2026. I believe this to be unrealistic. Venezuela peaked in 1998, Indonesia 1977, Iran 1978, Algeria & Kuwait are now in decline & there is political turmoil in Libya & Iraq.
It seems to me after reading this book that Saudi Arabia may get to 12 million barrels a day of production, if it is lucky, however maintaining today's high level of around 8.4 million barrels a day, let alone reaching 12 million barrels a day, for years or decades to come will be a tall order.
Mr Simmons ends the book with possible solutions that are all logical including conservation, local food production & consumption, liberating the workforce & curtailing globalisation. Some people have labeled Mr Simmons as a doomsayer, however he is making a completely logical argument & offering solutions, so I find this label ridiculous. I, however believe that it is too late. We should of been making these decisions & transitioning to other sources of energy with a lead time of at least 20 years. History has shown that it takes more or less 40 years to completely transition from one energy source to another, a gradual process that requires a lead time. The stone age did not end because we ran out of stones, the bronze age did not end because we ran out of bronze, however the oil age will end & it is most likely it will bring our industrial civilisation down with it. We are hopelessly unprepared.
I highly recommend this book if this topic interests you & in particular if you would like to learn what is involved in exploring for & producing oil. Mr Simmons has done an incredible job of explaining these concepts to the layman. If Mr Simmons was still alive today, I would thank him for his contribution in this field.
Mr. Simmons' thesis is that conditions experienced at individual oil wells can be extrapolated to determine the level of depletion of the entire oil field in which the wells are located. As background, Mr. Simmons used old, but comprehensive, data on Saudi oil fields that were compiled prior to when Saudi Arabia nationalized its oil industry. This data establishes which Saudi oil fields are the largest and most productive. Mr. Simmons then analyzed more recent papers written on individual wells within the most important Saudi oil fields to see if these wells were exibiting signs consistent with oil field depletion. For example, oil wells with problems such as "gas caps" or "high water cuts" can be an indication that the entire oil field is in an advanced state of depletion. Mr. Simmons concluded that problems indicative of depletion are occurring at wells in Saudi's most productive oil fields. Mr. Simmons also noted that production increases at smaller fields and the development of newly discovered fields have been barely sufficient to offset the declines at the older fields.
Mr. Simmons is a formidable researcher, but his writing skills leave something to be desired. Rather than condense the complex technical information into coherent conclusions, he simply repeats the same facts over and over, apparently hoping that the reader will "connect the dots" for himself. Because of this, I probably missed many of the points Mr. Simmons was trying to make. Better organization and summary of the complex material could have made the book half as long as twice as understandable.
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