The world’s two biggest oil and natural gas reservoirs are in the Permian Basin and Saudi Arabia with estimated remaining reserves of 50 billion barrels of oil and 300 trillion cubic feet of natural gas here and 58 billion barrels and 333 trillion cubic feet there.
Story Credit: Bob Campbell, Odessa American Texas
That’s about all they have in common, but that much makes a whole bunch of cachet on the global stage.
Related: An Elephant in The Desert – The Ghawar Oil Field in Saudi Arabia
Odessa oilman Kirk Edwards and the Washington, D.C.-based Independent Petroleum Association of America say Saudi Arabia will remain an oil and gas behemoth for decades to come and its whims and priorities must always be considered notwithstanding the eccentricities that make it one of the strangest countries on earth.
“Ever since 1997 when I started following this scenario, Saudi has been able to set the world price based on their ability to put oil on the market and take it off,” Edwards said. “They’ve been ruled by a kingdom for centuries. It’s not what America likes to see as a democracy, but that has been their political system and it will continue to be that way for centuries to come.
“They put oil on the market based on what pricing level they want to achieve and they are the dominant power over the rest of the countries in OPEC (Organization of Petroleum-Exporting Countries) and OPEC-Plus.”
Edwards said Saudi Arabia has oil and gas wells throughout its 830,000 square miles, compared to Texas’s 268,597 square miles, and its energy industry has been based in the Ghawar Field near the Persian Gulf since the discovery of oil there in 1948.
But he said the nation’s dominance is often resented by its partners in OPEC and OPEC-Plus. “OPEC works on a quota system and in 2020 before the pandemic hit, many of those countries were cheating on their quotas and putting a thumb in the eye of the Saudis,” Edwards said.
“The Saudis wanted to set an example, so they flooded the market and let those countries know that they had the ability to drop prices as quickly as they wanted to. It just ruined us when they did that.”
Asked if the most prominent OPEC-Plus member, Russia, will ever be re-admitted to the worldwide oil and gas business after its ostracism for its invasion of Ukraine, Edwards said it probably will be but only after it pays billions of dollars in reparations to Ukraine.
IPAA Senior Public Affairs Director Jennifer Marsteller said the Saudi Arabia leaders increasingly must balance their perspectives with those of Russia, Iran, the United Arab Emirates, Iraq and others within the producing group. “Finding consensus is not getting any easier given the internal relationship dynamics within OPEC and OPEC-Plus and considering the global geopolitical shift created by the Russian invasion of Ukraine,” Marsteller said.
“Just based on their enormous reserves and traditional political clout, Saudi Arabia will continue to have considerable influence in both the short- and long-term energy picture; however, the personalities involved are changing and so are the nuances of political ties.”
Marsteller said slowing inflation “is a challenge for all governments and this process will take time.
“Some countries including the United States have asked for production to be increased to help reduce global oil prices, but OPEC and OPEC-Plus have chosen to maintain their quota policy and their constituents are struggling even to meet these monthly quotas,” she said. “In addition, they have limited spare capacity among them with most extra capacity being in Saudi Arabia and the UAE.”
As an example of the political fluctuations, Marsteller cited Saudi Arabia’s decision not to get involved in the European Union’s sanctions against Russia. “These countries exert maximum control internally, but they have shown that they are much more careful about getting involved in political spheres outside of their country or group,” she said.
“The U.S. relationship with Saudi Arabia has only become more complicated. Perhaps we will never return to our ‘traditional’ relationship. The U.S. needs to focus on its own domestic oil and gas business and reduce its dependence on foreign supplies that may come with uncomfortable political or diplomatic undertones.
“Similarly, the U.S. will have more limited ability to influence OPEC and OPEC-Plus in how they react to global events and flashpoints. The two countries are likely to become more independent and less reliant on each other in the areas of diplomacy and military support.
“The onus will be on the U.S. to better manage its medium- to long-term energy supply given the preponderance of reserves possessed by Saudi Arabia. The unfolding situation in Europe reminds us of the dangers of over-dependence on something so critical as energy.”
The members of OPEC are Algeria, Angola, The Republic of the Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the UAE, Venezuela and of course Saudi Arabia.
OPEC-Plus consists of Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, The Philippines, Sudan, South Sudan and Russia.