STATEMENT BY THE DIRECTOR OF CENTRAL INTELLIGENCE BEFORE THE SUBCOMMITTEE ON ENERGY AND MANPOWER HOUSE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE MONDAY, 25 APRIL 1977

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP99-00498R000300020015-4
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 12
• Document Creation Date: December 20, 2016
• Document Release Date: February 28, 2007
• Sequence Number: 15
• Publication Date: April 25, 1977
• Content Type: OPEN SOURCE

Approved For Release 2007/03/06: CIA-RDP99-00498R000300020015-4
STATEMENT BY
THE DIRECTOR OF CENTRAL INTELLIGENCE
BEFORE THE
SUBCOMMITTEE ON ENERGY AND MANPOWER
HOUSE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE
Monday, 25 April 1977
1:30 p.m.
 . Approved For Release 2007/03/06: CIA-RDP99-00498R000300020015-4
In preparing our analysis we drew on a broad spectrum
of energy-related disciplines such as geology and petroleum
engineering which have no fixed home in either government,
business or academia. And, of course, in some very important
areas we have access to material not available to other
energy forecasters. As a matter of course we consult fre-
quently with other US government agencies including FEA, State,
Interior and ERDA and have done so over the many years we have
been doing in-depth analysis on the international energy scene.
As such, publication of the report represents a normal part of
our analytical production process. FEA and ERDA have been
fully briefed on our assessment.
 - Approved For Release 2007/03/06: CIA-RDP99-00498R000300020015-4
April 1977
THE INTERNATIONAL ENERGY SITUATION
I. Mr. Chairman, CIA's economic analysts have just
completed about a year's work in forecasting
world oil demand over the next decade or so. I
would like to highlight the results for you. I
think that you will find it both interesting and
sobering.
II. In brief, our conclusion is this: In the absence
Graphic: of greatly increased energy conservation, projected
Supply/
Demand Gap) world demand for oil will approach production capa-
city by the early 1980s and substantially exceed
capacity by 1985.
A. In these circumstances, there will be pressure
on prices to ration available supplies. Saudi
Arabian production will be inadequate to keep
prices down.
B. Our forecast of oil supply and demand through
1985, though broadly resembling other official
Energy - 1
 Approved For Release 2007/03/06: CIA-RDP99-00498R000300020015-4
and private forecasts, is more pessimistic
III. Our pessimism is based on our estimate that the USSR
will change from an exporter to a substantial importer
of oil in the early 1980s; on our estimate that
non-oil energy supplies can not be counted on to
resolve the problem between now and 1985; and on
continued growth in demand.
(Graphic: A. As our Soviet estimate is crucial to our anal-
Soviet Crude
Production) ysis, I would like to go into it in some detail.
B. Soviet oil production will soon peak, possibly
as early as next year and certainly not later
than the early 1980s.
1. The maximum level of output is likely to
be between 11 and 12 million b/d.
a. The current level (1976) is 10.5
million b/d.
2. Maximum levels are not likely to be main-
tained for long.
Energy - 2
 . Approved For Release 2007/03/06: CIA-RDP99-00498R000300020015-4
C. The Soviets have a problem of production in
that those fields that account for the bulk
of Soviet production are experiencing severe
water encroachment. As a result, increasingly
large quantities of water must be lifted for
each barrel of oil produced.
D. Unlike the US, which has long restricted
production for reasons of conservation and
profit, the USSR favors maximized production.
1. Short-term goals are considered floors,
not ceilings, and rewards are given for
exceeding them.
a. Under these conditions, Soviet produc-
tion has expanded much more rapidly
than that of the US, resulting in:
--Overproduction from existing wells
and fields.
--New production requirements that will
soon run far beyond the Soviet oil
industry's. capability.
Energy - 3
 - Approved For Release 2007/03/06: CIA-RDP99-00498R000300020015-4
E. Soviet proved reserves are probably in the
range of 30 to 35 billion barrels--roughly
comparable with those of the US--but develop-
ment of Soviet reserves in the Arctic, East
Siberian, and off-shore areas is at least a
decade away.
F. Thus, during the next 8-10 years, almost all
Soviet output will have to come from existing
producing areas.
(Graphic:
Soviet Oil
Fields)
1. Current Soviet plans call for holding
aggregate output nearly constant west of
the Urals, while doubling production in
West Siberia.
G. Because of a variety of problems, we believe
that output west of the Urals will decline
because production is coming increasingly from
greater depths and from more intensive exploita-
tion of already tapped reservoirs. Production
from Siberia will fall far short of doubling
because of inhospitable climate, difficult
terrain, and vast distances greatly complicating
operations.-
Energy - 4
 - Approved For Release 2007/03/06: CIA-RDP99-00498R000300020015-4
1. The main Soviet oil field at Samotlar
reach peak production in the next year or
so and will hold peak levels for no more
than four years.
H. The USSR does not have the drilling capability
to pursue adequate development and exploration
programs simultaneously.
1. Although the Soviets have almost as many
active rigs as the US, the Soviet effort
amounts to only one-fifth that of the US in
terms of meters drilled.
a. In 1971-75, the Soviet Ministry of the
Oil Industry drilled a total of about
52 million meters.
b. In 1975 alone, the US drilled 53 million
2. Even with maximum effort, the Soviets will
not come close to the 1980 goal of drilling
75 million meters called for by their current
five year plan.
Energy - 5
 (Graphic:
USSR Fluid
Lifting)
Approved For Release 2007/03/06: CIA-RDP99-00498R000300020015-4
I. Even more serious than the drilling problem is
the fluid lifting problem created by their
practice of massive water injection within and
along the edges of each oil field.
1. Although massive water injection can boost
production for a time, eventually the water
will find a channel of least resistance and
break through to the oil-producing well,
leaving behind much oil in the less permeable
portions of the formation.
2. When the wells begin to show water in large
quantities, the natural flow will usually
stop and the wells must be put on the pump.
3. In this case, however, conventional pumping
equipment cannot be used; special high
capacity submersible pumps are needed
because much greater volume of fluid (oil
plus water) must be lifted.
J. There is no question that new fields--some
quite large--will eventually be discovered.
Energy - 6
 Approved For Release 2007/03/06: CIA-RDP99-00498R000300020015-4
1. However, given the rapid rate of depletion
of existing fields and the technical diffi-
culties associated with exploration and
exploitation in frontier areas, we doubt
that the new discoveries will come on stream
rapidly enough to do more than temporarily
arrest the rapid slide of Soviet output.
K. We estimate that in 1985 the USSR and Eastern
Europe will need net imports of 3.5 to 4.5
million b/d.
IV. Our forecasts of energy production outside the Soviet
(Graphic: bloc do not differ greatly from those of other govern-
Non-OPEC
Production) ment agencies, companies, and independent consultants.
A. Mexican production, which may be as high as 4.5
million b/d by 1985, will be very welcome but
will not significantly alter the essentially
gloomy world energy picture.
B. The same is true of Egypt. Egyptian oil poten-
tial is probably higher than was originally
believed. We have taken this into account in
our forecast.
Energy - 7
 r Approved For Release 2007/03/06: CIA-RDP99-00498R000300020015-4
C. Over the years we have extensively researched
the energy potential of the People's Republic
of China; we have concluded that China will no
longer be a net exporter by 1985.
D. By 1980, growth in North Sea supplies will be
slowing, Alaskan output will have stabilized
but the underlying supply problem will be masked
during the next few years because of the greatly
increased oil production from the North Sea and
Alaska.
V. Between 1979 and 1985, however, increasing world
demand and stagnating oil production in the major
consuming countries will result in increasing
reliance on OPEC oil.
A. By 1985, we estimate that demand for OPEC oil
will reach 47-52 million b/d. (Currently, it
is about 32 million b/d.)
1. Even if all other OPEC states produce at
capacity, Saudi Arabia will be required
to produce between 19 and 23 million b/d
if demand is to be met.
Energy - 8
 Approved For Release 2007/03/06: CIA-RDP99-00498R000300020015-4
2. This is well above both the present Saudi
capacity of 10 to 11 million b/d and the
projected 1985 capacity of 18 million b/d.
3. If the Saudis follow through on current
expansion plans, their excess productive
capacity would be exhausted by 1983.
VI. Thus, although Saudi Arabia has the oil reserves to
meet increasing demand between now and 1985, we
doubt the Saudis will be able to increase produc-
tion sufficiently.
VII. Non-oil energy supplies cannot be counted on to
relieve the problem appreciably between now and 1985.
A. Given the long lead time required, we do not
believe nuclear power plants will contribute
more than the equivalent of 6 million b/d to
new fuel supplies by 1985.
B.. Natural gas supplies outside OPEC will increase
little during the period. Increased output in
the North Sea will probably be offset by
declines in the US and Canada.
Energy - 9
 Approved For Release 2007/03/06: CIA-RDP99-00498R000300020015-4
C. Coal production will expand in the US, but not
in most other Free World countries.
IX. This analysis indicates that if large-scale conser-
vation does not suppress demand, prices will have to
rise in order to ration available supplies.
Energy - 10