Wednesday, February 9, 2011

Saudi oil reserves 'overstated'

The United States fears Saudi Arabia may not have enough oil reserves to prevent world prices rising sharply, according to cables from its embassy in Riyadh published on Wednesday.

The cables, obtained by WikiLeaks, urge Washington to take heed of a warning from a former Saudi government oil executive that the kingdom's crude oil reserves may have been overstated by as much as 40 percent.

US diplomats reported that Sadad al-Husseini, the ex-head of exploration at Saudi oil monopoly Aramco, "disagreed'' with Aramco's analysis that it had reserves of 716 billion barrels and that would rise to 900 billion barrels in 20 years.

The claims about the world's largest crude oil exporter, published in The Guardian newspaper, come as the price of oil has soared in recent weeks to more than $100 a barrel amid tensions in the Middle East and global demand.

Many analysts expect that the Saudis and their OPEC partners will pump more oil if rising prices threaten to choke off demand.

But the cables say Husseini told a US diplomat in November 2007 that Aramco's 12.5 million barrel-a-day capacity needed to keep a lid on prices was unfeasible.

Husseini reportedly told the diplomat in 2007 that Saudi Arabia might reach an output of 12 million barrels a day in 10 years _ which it actually did in 2010.

At that point, he suggested Aramco would be powerless to stop the rise of global oil prices because the Saudi energy industry had overstated its recoverable reserves to spur foreign investment, he said.

However, Husseini said Wednesday he was "misquoted'' in the cable and told Dow Jones Newswires he had "no doubt that the figures Aramco are publishing are actually right''.

"What I'm disputing (in the leaked cable) is the 900 billion barrels figure, and correcting the fact that the 716 billion barrel figure is oil in place, not reserves,'' he told Dow Jones.

"If you look at Aramco's report on reserves, it says 260 billion barrels. If you say this figure is 700 billion barrels, you're overstating it.''

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