Saudis Hatching Plan for More Capacity in Long Term: Report
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Author: International Oil Daily
Released 9 March 2006
INTERNATIONAL OIL DAILY, February 24, 2006:
Saudi Arabia is studying plans to raise its oil production capacity to around 13 million barrels per day by 2013, according to a consultancy report obtained by International Oil Daily.
Four mega projects at various stages of development are already under way to boost the kingdom's capacity to 12.5 million b/d by 2009 from around 11 million b/d.
State Saudi Aramco is now considering a five-stage capacity hike involving the Shaybah field; the Neutral Zone, which Saudi Arabia shares with Kuwait; and the giant offshore Manifa field, said the report by Nawaf Obaid of the Saudi National Security Assessment Project (SNSA).
Saudi Arabia had indicated that it could continue raising capacity beyond the 2009 target. However, Saudi Oil Minister Ali Naimi this month expressed concerns about "all the talk about not wanting our oil" -- a thinly veiled reference to US President George W. Bush's State of the Union address in which he called for a 75% reduction in Mideast oil imports (IOD Feb.8, p1).
The first phase of the longer-term plan would involve adding 200,000 b/d from Shaybah by 2010. The field currently produces 500,000 b/d of Arab Extra Light and is being developed to pump a further 300,000 b/d by late 2008. The final development -- pushing levels to 1 million b/d -- is estimated to cost $1 billion.
Next in line would be the Neutral Zone, which currently has a production capacity of 600,000 b/d, split equally with Kuwait. Saudi Arabia is expected to add 150,000 b/d for its output slate by 2010 at a cost of $500 million, according to Obaid. This would include at least an additional 50,000 b/d from the offshore Khafji Joint Operations (KJO), a joint venture between Aramco Gulf Operations Co. and Kuwait Gulf Oil Co. (IOD Feb.9'05,p4).
The next three increments would all come from the heavy oil Manifa field, pushing capacity to 1 million b/d of 28° API gravity crude. The first two stages of 300,000 b/d each would come on stream in 2011 and 2013, with the third and final 400,000 b/d addition brought on line later in 2013, Obaid said. The cost of demothballing this field, which was first discovered in 1957, is estimated at $5 billion-$7 billion.
"A decision to bring [Manifa] on line depends on market fundamentals and progress of the planned increases in Saudi Aramco's domestic and international downstream refining operations," Obaid said in the report.
Aramco is expected to launch the front-end engineering and design contract for Manifa's development by late 2006, industry reports say. The project will involve the supply and installation of at least three platforms and subsea pipelines, according to the reports.
In all, the five increments would add a total of 1.35 million b/d -- but with natural declines estimated at 800,000 b/d per year, Saudi Arabia's sustainable capacity would end up at 13.05 million b/d by 2013, according to the report.
Obaid cautions that these projects are "under consideration; estimates assume decision to expand."
Saudi Arabia has four oil development projects under development for the earlier 2009 target: Khursaniyah (500,000 b/d), Shaybah (300,000 b/d), Nuayyim (100,000 b/d) and Khurais (1.2 million b/d) (IOD Oct.21, p3).
Saudi Arabia is also pushing ahead with a number of domestic downstream projects aimed at boosting refining capacity to 3.4 million b/d by 2011 from 2.1 million b/d today, according to the study.
In addition to the construction of two new joint venture export refineries in Jubail and Yanbu which will add 800,000-850,000 b/d of refining capacity by the end of the decade, Aramco is pursuing the petrochemicals integration at its Rabigh plant.
Total has been chosen as Aramco's partner for the 400,000-450,000 b/d Jubail refinery, and a decision on the Yanbu plant is expected soon (IOD Feb.16,p1).
The kingdom's small west coast refinery at Jeddah, which currently refines 85,000 b/d, is also due to be expanded by 65,000 b/d at a cost of $1.5 billion, the report said. It puts total costs for domestic refining expansions at some $16 billion.
Aramco's plans abroad include expansion of the US Motiva joint venture with Royal Dutch Shell by 365,000 b/d, from a current 725,000 b/d. The expansion will take place at the Port Arthur refinery in Texas, according to the report. Previous estimates for the refinery's development were put at 315,000 b/d (IOD Jan.12,p1).
In India, Aramco is pursuing the construction of a 350,000 b/d grassroots refinery at a cost of $4 billion, the report said. Aramco is a 25% stakeholder at the 160,000 b/d Fujian expansion project in China with Exxon Mobil and Sinopec, and is expected to partner Sinopec in the new 200,000 b/d in Qingdao refinery project, according to the report. These two projects are valued at $3 billion.
Raja Kiwan, Dubai