Gavar's Production, Rapidly Declining? - Oilfield Drilling Equipment Supply & Solutions
Monday, 15 April 2019 08:45

Gavar's Production, Rapidly Declining?

Not long ago, Saudi Aramco, the world's largest oil company, was first publicized for 40 years, and it also unveiled the mystery of the super-large oil field of the Ghawar Oil field.

It is worth noting that the production capacity of the Gavar oil field is surprising. The Garwal oil field is currently the world's largest proven oil field and the world's largest onshore oil field.

The company's bond prospectus shows that the Gawar oil field produces up to 3.8 million barrels of crude per day, a figure that is far below what most people in the market think is more than 5 million barrels. This also led the market to speculate that Gavar's production has peaked and is rapidly declining.

However, Oilprice analyst Robert Rapier believes that the number itself does not support such a conclusion. This is an example of confirming bias, which refers to a person's tendency to understand information as a confirmation of an existing belief.

There is another possible explanation. Saudi Arabia has long played a key role in the world oil market. They remain idle production capacity. This allows them to increase and decrease production based on their perception of market demand and agreed OPEC quotas.

Therefore, Gavar is likely to be running at full capacity. Given the information in the prospectus, one can easily conclude that Gavar's production is declining. I don't know which explanation is correct, but we should not rush to draw conclusions based on limited information.

It is worth noting that those who are most likely to accept the explanation that “Gawal is rapidly declining” are those who refused Saudi Arabia’s repeated statements in the prospectus that the oil and gas reserves were equivalent to 257 billion barrels.

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