Here is an excerpt on the topic from a (somewhat technical) discussion of Saudi Arabia's oil supply problems on
The Oil Drum.
Now, your first thought might be this: if there is 10% water and 90% oil in a particular volume of rock (pink areas in the figure above), then a well into that part of the rock would be receiving 10% water and 90% oil. Similarly, an area with 60% water and 40% oil might be producing at 60% water cut into a well into that area. However, this is not so: the difference is much more dramatic than that. The reason has to do with the physics of two phase flow in a permeable medium. If you want a mathematical treatment, try this, but let me try to illustrate the basic idea.
In a set of interconnected pores through which oil and water are being forced at pressure, the flow is too turbulent for large areas of the two fluids to separate out from one another. And yet, oil and water do not like to mix, and will tend to bead up in the presence of the other. If there is only a little water and a lot of oil, then the oil will form an interconnected network of fluid throughout the rock pores, whereas the water will tend to make small beads within the oil. Conversely, a little oil in a lot of water will result in a network of water throughout the rock, and small beads of oil within that network. Now, in either situation, the fluid that is interconnected can flow through the rock without making any change in the arrangement of beads and surfaces between oil and water. However, the fluid that is beaded up can only move by the beads physically moving around, and they are going to tend to get trapped by the rock pores.
So for this reason, in a mixture of almost all oil, the water cannot flow at all. Conversely, once there is almost all water, the oil cannot flow at all (which sets an upper limit on the amount of oil that can ever be recovered by a water flood). In between, there is a changeover in which the proportion of oil flowing to water flowing changes much more rapidly than the changeover of the actual mixing ratio. The curve that describes this is called the fractional flow curve.
So the way to read this is that when we are below 20% on the X-axis (less than 20% water in the oil), there is zero on the y-axis (the water will not flow through the rock at all). As we get above 20% water saturation, the flow of water increases rapidly, until above 80% water, there is no flow of oil at all. In the linear region at the center of the curve, the slope is about 3.6. That is, each 1 percentage point increase in water saturation results in a 3.6 percentage point increase in water flow in the rock.
The whole article is worth reading if you're into oil issues, but the takeaway is that Ghawar has probably hit the very steep central portion of that curve, and they're switching from water (immiscible) to CO2 (miscible) injection to maintain their output for a bit longer. The fact that they advanced the CO2 injection start by a year means they've probably had an "Oh shit" moment.
Ghawar is also one of the most porous oil-bearing formations on Earth, so the fact that they're going to CO2 means that it may be almost empty.
Once you really get FF curves, you won't sleep nearly so well at night.
Edited to add: The carbon sequestration angle is nothing but camouflage IMO.
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