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Salty Saudi Tears

Keith Kohl

Written By Keith Kohl

Posted April 12, 2013

Psychologists call it pseudologia fantastica, or mythomania, as well as about a dozen other names. 

We know those who suffer from this condition as pathological liars.

You’ve undoubtedly encountered someone with this disorder at one point or another (I know I have). But the most egregious case I’ve ever come across isn’t an individual, but rather a whole nation…

Saudi Arabia has been telling the world lies for so long, hardly anyone notices anymore.

Sure, we’ll catch a glimpse of the truth every once in a while. Perhaps you saw the WikiLeaks report a few years back in which the amount of Saudi oil reserves were called into question — specifically, that reserves were overstated by nearly 40%. But there’s something even more insidious on the horizon than the Saudis’ reserve base…

Their cover story concerning the world’s largest oil field, Ghawar, promises to have much more serious implications.

Giants Rule the World

Without question, one of the most overlooked aspects of global oil production is how dependent we are on massive oil fields like Ghawar.

Discovered in 1948, more than 65 billion barrels of oil have been extracted from this field, which still produces more than five million barrels per day.

ghawar 4-12

To put this into perspective, that’s about 60% of Saudi Arabia’s crude supply and more than 16% of OPEC’s output — it accounts for roughly 6% of total global oil production.

Mind you, the Saudis are no stranger to this kind of dependence. Nine out of every ten barrels produced in their country come from just five fields.

Let me back up for just a moment and explain why the Saudis’ spin on Ghawar isn’t just a little white lie the sheiks are telling us…

Heavily relying on massive oil fields like Ghawar isn’t just a Saudi problem. Far from it. Because when it comes to the world’s oil supply, the scariest aspect is how much the rest of the world does, too.

Few people realize most of the world’s oil production comes from just a handful of huge oil fields. About two dozen oil fields make up roughly one-quarter of global crude output.

In 2005 there were fewer than 1,000 oil and gas fields that were big enough to be considered “giant” (that is, having 500 million barrels of ultimately recoverable oil), and they represented 60% of the world’s oil production. That’s out of more than 65,000 oil and gas fields across the globe.

Think about that for just a second…

That means less than 1.5% of the world’s oil fields account for 40% of its production.

Now let this sink in: Over 90% of the world’s known oil is found in less than 1,500 fields.

The real problem is we aren’t finding these giant fields anymore. This is the harsh reality of the fossil fuel situation on this planet.

Giant oil discoveries

Making matters worse is the fact that the fields we are finding can’t produce nearly as much as the older super-giant fields.

During the 1990s, more than a dozen of these fields were able to pump out more than one million barrels of oil per day. Today that number has dwindled to three.

The 8% Fear Factor

Why is losing Ghawar so important?

Well, as one of my colleagues put it years ago: “If Ghawar fails, then Saudi Arabia fails… and if that happens, everything is going to hit the fan at once.”

The average decline rate for an oil field is arguably 4.5% (and that’s a low-ball estimate). Some have pegged Ghawar’s annual decline rate closer to 6.7%. Saudi Aramco officials, however, have already come clean, saying it’s closer to 8%.

The Next Step

Although the Saudis aren’t forthcoming when it comes to their oil fields (this data is a closely-guarded secret among OPEC members), future production problems are just the tip of the iceberg when it comes to the Kingdom’s pending oil crisis…

Don’t be fooled into thinking it’ll happen overnight or even in the next ten years.

But further down the road, we’ll encounter a whole new ball game as the Saudis’ biggest lie comes to light.

Not only does this have Saudi billionaires desperately scrambling to boost alternative energy sources, but the smart money is already preparing for it.

Until next time,

Keith Kohl Signature

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.

Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.

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