A Kuwaiti friend once told me that even though he doesn't gamble because of his religion, he loves to play games. The Kuwaiti parliament made clear this week that it prefers to do neither.

Kuwait, OPEC's fifth-largest oil producer, caused a chain reaction wreck in world oil markets last January. First, it got hit with the truth--Petroleum Intelligence Weekly, an industry publication, announced that secret reserve accounting put Kuwait's petroleum holdings at half the official estimate. Then the markets got hit with a rise, more than two bucks a barrel the next day.

In a world of Peak Oil, oil-rich states like Kuwait and their OPEC allies would rather string us junkies out as long as they can by promising bountiful future flow.

Patting us on the back and saying the oil won't run out any time soon is paired with threats of supply reduction if major consumers like the United States pursue other energy options, like renewable energy and other alternative sources.

So when PIW pulled the magic carpet out from under Kuwait's book-cookers, showing that their 99 billion barrels were really more like, ahem, 49 billion, the powers that be in that Gulf emirate got spooked.

So did oil buyers around the world, since the discrepancy PIW pointed out amounts to 4% of total global reserves. Kuwait pumps between two and three million barrels per day, and Kuwait Oil Company chairman Farouk al-Zanki told Reuters on July 3 that his country-run company will put out four million bpd by 2020, or even earlier.

This seems doubtful, given that Kuwait's primary production source, the Burgan field, has been in decline since 2005. Burgan provides a full half of Kuwait's production.

This week, we are seeing the result of Kuwait's own fear as Kuwaiti parliamentarians who shudder to think that the wells are running dry are demanding a proper accounting of the country's reserve capacity.

If the numbers aren't believable, say the members of Kuwait's majlis (parliament), the country's budget for the coming year will be withheld.

Is it too much to hold back funding for the schools, sewers, and other public works of an entire nation just over some bookkeeping? Not if the accounts in question generate 75% of gross domestic product!

Fuzzy Math, Sloppy Semantics

Sheikh Ali al-Jarrah al-Sabah, the former oil minister and member of the royal family who resigned in June, told Kuwaiti newspaper al-Jarida before he left office that he could not deny PIW's revelation. Then he questioned PIW's definition of reserves, shedding a bright light on a major point of contention throughout the Peak Oil debate.

It may seem like nit-picking, but there is a major difference in confidence in proven reserves, possible reserves, and probable reserves in an oil-thirsty world. How much water will you have to pump in to extract the crude? How sweet will it be, in petrochemical terms? Ultimately, how much will it cost to get the stuff out of the ground all the way to the consumer?

Pressing questions indeed for the privileged members of Kuwait's majlis. As legislative deputy Ahmed Lari told newspaper Alam al-Youm, "We cannot make the correct future plans without knowing the size of the reserves . . . so this should be made clear to parliamentarians before the session to pass the state budget."

Late Wednesday, after a closed-door session, acting oil minister Muhammad al-Olaim told gathered reporters that his country does indeed possess 100 billion barrels of black gold.

So is the matter settled? Far from it. One member of the parliamentary opposition emerged from the same meeting, still incredulous. He told reporters that the minister "did not provide concrete evidence about the size of the reserves."

Just ask yourself, if the Kuwaiti parliament is in the dark about the state of its own oil production, how much do you know?

As the oil thins, the plot thickens.

Regards,

Sam Hopkins

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