Ghawar and the IPO

More than ten years ago, in 2005, the late investment banker Matthew Simmons published Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. It’s sitting on my shelf but I have not gotten very far reading it, I must admit. Simmons tried to show that Saudi Arabia’s fields, most importantly the giant Ghawar field, were on the verge of production decline or had starting declining. Oil output from Ghawar is a state secret (!) so it’s hard to assess Simmons’ claim in its regard, but the Saudis have launched two large fields since 2005 to keep up their production capacity.

Matthew Simmons was a peak oiler, a perfect object for ridicule nowadays. He did not live to see the full extent of the shale revolution. Despite being in the business of arranging deals between North American oil companies, he did not anticipate that horizontal drilling and multistage fracking would transform America’s oil sector. But his points about Ghawar may still be valid, even if he misjudged the timing of the production decline he prophesied.

Now that Prince Muhammad has hinted that Saudi Aramco could go public, an independent reserve audit would seem a prerequisite for the IPO. That’s one of the reasons why the Saudi Aramco placement seems like something out of this world: not only would its accounts be published, but a Miller and Lents or a DeGolyer and MacNaughton would finally shed light on the great mystery of Ghawar.


  1. Word on the street (meaning, Twitter) is that their upstream assets won’t form part of the IPO. If they float on the NYSE they’d need to comply with SEC regulations, and there is no chance of that.

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