Saudi Aramco Teams with French Institute

Saudi Aramco and the French Petroleum Institute (IFP) recently signed a memorandum of understanding that links the world's largest oil producer with one of the world's most sophisticated petroleum research and engineering organizations.

"We look forward to working with you, and we really appreciate what you are doing for us," Saudi Aramco president and CEO Abdallah S. Jum'ah told IFP chairman and CEO Olivier Appert during the signing ceremony on May 16.

"Hopefully, a lot of opportunities will present themselves for your benefit and our benefit - for the benefit of the whole world," Jum'ah added.

The memorandum paves the way for a variety of cooperative ventures, including reservoir engineering and drilling to training at the IFP school through its many partnerships with leading French universities.

The IFP is subsidized by the French government and has activities in more than 100 countries. Through its research arms, it tackles everything from heavy crude pipeline issues to deep-sea drilling. Through its subsidiaries, it also creates products from oil field software programs to hydrocrackers for use in refining and the petrochemicals industry. It also has researchers working on more efficient combustion engines and many environmental issues.

The IFP works closely with Total - which in partnership with Saudi Aramco will be exploring a portion of the Rub' al-Khali for gas reserves - and with Saudi Aramco's joint venture partner S-Oil, which does business in Korea.

"We have a lot of expertise both upstream and downstream, and I think that we may cooperate in those different fields, not only with research but in expertise and consultancy work," Appert said.

"I'm sure that there will be significant benefits for both parties," Appert said. "We have the expertise - the science and technical knowledge. Saudi Aramco has the fields and the investment and the facilities, so it fits quite well."

Appert made headlines in 2003 when he declared that there are no more significant reserves to be discovered globally and the world oil depletion rate was between 5 percent and 10 percent per year.

He said this week he still stands by those observations. In a May 16 interview, he said he is convinced that Saudi Aramco has extensive reserves and predicted "the last drop of oil" produced would come from Saudi Arabia.

"For the last five years, the new discoveries have been covering only 40 percent of the consumption," Appert said. "So there have been no really big discoveries for the last 10 years. That's the first concern. The second issue is the depletion rate.

"I think the oil industry does not pay enough attention to this issue. We discuss the increase in demand, but we don't discuss the natural decrease of production through the depletion factor," Appert said. "This depletion is the hidden part of the iceberg, and it's more important to have a clear view on the depletion ratio in Saudi Arabia or Venezuela rather than discussing the increase in demand by 1 percent or 2 percent."

Saudi Aramco's exploration efforts consistently have replenished its reserves by equaling or exceeding production levels. The company recently reported that further exploration in untouched parts of the Kingdom and the Red Sea Basin could add hundreds of billions of barrels to reserves in the future.

Appert said Saudi Aramco's recent release of reserve data was both interesting and worthy of further study. "There's a huge debate, mostly in consuming countries, on this issue," Appert said. "The debate on the reserves of Saudi Aramco also has been quite important as has the debate on the reserves of Shell.

"That's not an easy question, and even the SEC regulations are not very precise. I am convinced that there are a lot of reserves in Saudi Aramco, and the last drop of oil will come from Saudi Arabia."