Saudi pursues plan to raise output

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Saudi Arabia is pushing ahead with mega projects to lift its sustainable oil production capacity to 12.5 million barrels per day at the end of 2009 but it appears to have suspended long-term plans, a Saudi group said yesterday.

The kingdom, which sits atop a quarter of the world's recoverable crude deposits, is pumping nearly $60 billion (Dh220.38bn) into five major projects to expand output capacity from its present level of about 11.3 million bpd.

"The five capacity expansion projects will cost nearly $60bn. They will bring on-stream 2.95 million bpd of oil. This is equivalent to three per cent of global oil supply and greater than the total production of Kuwait," the Riyadh-based Jadwa Investment Company said in a study, citing government data. "Total production capacity will increase by less than this as Saudi AramcoSaudi Aramco assumes some production declines elsewhere. The net addition lifts capacity by about 12.5 million bpd and the bulk of the capacity to come on-stream over the next couple of years is light crude."

Buoyed by a surge in its petrodollar income, Saudi Arabia kicked off the world's largest capacity-building programme five years ago to expand its sustainable output and maintain existing capacity by offsetting a decline in some fields. Opec's de facto leader has set a target of 12.5 million bpd by the end of 2009 and 15 million bpd in the following years. But the Saudi Oil Ministry has said recently the extra capacity would not be needed at least at present.

"It will be some time before the decision is made as to whether to go ahead with the new capacity but by providing the basic details, the kingdom has reassured the oil market that additional supply will be forthcoming if required," Jadwa said.

Oil analysts said Riyadh is pressing ahead with major capacity expansion projects although the country already maintains the world's largest spare capacity of about two million bpd. They considered such a decision as a message of reassurance to the market and a cushion against fresh price spikes.

Although it has been overtaken by Russia as the world's largest oil producer over the past few months, Saudi Arabia has remained the dominant crude exporter.

The largest single oil capacity expansion venture is at the Khurais oilfield that will add about 1.2 million bpd of light crude, which is favoured by global refiners for its low sulfur ratio and the fact that it is easier to process, said government-owned Saudi AramcoSaudi Aramco.

"Saudi AramcoSaudi Aramco's ambitious capital programme achieved many milestones during 2007 toward construction of crude oil increments," AramcoAramco said. "Since 2001 through the completion of Manifa in 2011, we will have built more than four million bpd of oil production capacity."

Khurais, one of the largest oilfield development projects in the world, would add 1.2 million bpd of light Arabian crude to the production capacity. Manifa will add 900,000 bpd while Khursaniyah involves an additional 500,000 bpd and Shaybah will pump an extra 250,000 bpd. Another 100,000 bpd will come from Nuayyim field.

Largest oil projects

The largest oil projects in Saudi Arabia are:

- Khursaniyah: Production facilities were completed at the end of 2007 and it is slated to come on-stream this year. The plant has the capacity to process and stabilise 500,000 bpd of Arabian light crude.

- Khurais: The programme, the largest integrated project in company history and the largest industrial project in the world, is on track for facilities completion. It will increase production capacity of Arabian light crude by 1.2 million bpd through a new central processing facility, the largest of its kind in Saudi Arabia.

- Manifa: The Manifa oilfield programme will be developed with onshore and offshore wells using electric submersible pumps to produce 900,000 bpd of Arabian heavy crude oil starting in the third quarter of 2011.

- Shaybah: Major installations of the Shaybah crude oil expansion programme include a gas-oil separation plant and gas compression and injection facilities. When the facilities are complete in December this year, Shaybah field production capacity of Arabian extra light oil will increase from 500,000 bpd to 750,000 bpd in 2009.

By Staff Writer

© Emirates Business 24/7 2008