OUTLOOK

Saudi Arabia pushes forward

 In addition to expanding oil and gas output, new discoveries have been made. 

Dr. A. F. Alhajji, Contributing Editor, Middle East

Terrorist attacks and plans to attack oil facilities have neither affected the Saudi oil sector, nor the plans to expand production capacity. At the end of last April, the government announced that it foiled plans for an airborne attack on oil facilities and arrested 172 suspects. Saudi Aramco has beefed up security in recent years, but mostly against ground attacks.

Higher oil prices, major infrastructure projects, and the building of industrial cities have improved Saudi economic performance since 2004. The economy grew at about 6% in 2006 from less than 1% in 2002. Government debt as a percentage of GDP has declined substantially. However, problems remain. Unemployment among certain age groups is still high. Inflation has risen substantially in the last two years. Family debt has soared. The stock market is still struggling. Reform has slowed down.

Saudi policymakers realize the value of natural gas and its role in economic development. Gas demand has increased rapidly and is expected to continue growing in the next two decades. Since then, Saudi Aramco has embarked on an extensive program to search, discover, transport and deliver gas.

Exploration. Aramco announced the discovery of four new gas fields in 2006-Karan-6, Zimlah, Kassab and Nujayman. Aramco discovered a new reservoir of non-associated gas in the offshore Karan oil field, with an estimated 9 Tcf of gas. The oil field was discovered in 1967.

Last November, Aramco announced a new gas discovery in the Unayzah reservoir, south of Ghawar field in the Eastern Province. Nujayman-1, 30 km south of Ghawar, tested gas at 15,000 ft. It flowed 30 MMcfgd, with 1,116 bcpd. Once completed, the well should produce up to 60 MMcfgd. In February 2007, Aramco announced an oil discovery southeast of Ghawar field. Dirwazah-1, 70 km southeast of Ghawar, tested oil at 15,310 ft. It flowed 3,915 bopd, with 11.9 MMcfgd. Aramco plans to drill more than 300 gas development wells, and 230 exploration and delineation wells by 2011, to add 100 Tcf to its current gas reserves.

The Dirwazah 1 oil and gas find was struck near the southern tip of Ghawar field in February 2007.

Drilling/development. Saudi Aramco is working on 52 projects to expand production capacity. It plans to expand oil production capacity by 3 million bpd by 2009, with emphasis on expanding light crude capacity. While most plans will end by 2009, there is a plan to expand capacity from various fields to 13.5 million bopd by 2011. In fact, Aramco has already decided to accelerate development of Karan gas field and decided to spend $10 billion to bring it online by 2011.

Aramco finished several projects in 2006, including Midrikah gas field, which produces 30 MMcfgd and 900 bcpd. Aramco finished the Haradh-III Increment five months ahead of schedule. This added 300,000 bpd of Arabian Light production capacity to Ghawar, and 140 MMcfd of associated gas. By utilizing advanced technologies, Aramco increased well productivity significantly from 3,000 and 6,000 bopd in Haradh I and II, to an average 10,000 bopd in Haradh III.

By Saudi standards, 2006 was an active year. Rig count increased 26%, from 90 to 113 rigs. This includes: 75 development rigs, of which 10 operated offshore, and 32 workover rigs, of which 8 were offshore. The estimated number of wells drilled in 2007 should increase 5%. Aramco completed 333 new oil wells in 2006, of which 39 wells were offshore. It also drilled 35 onshore gas wells during the same period. The company reported that more than 80% of all wells drilled in 2006 were horizontal wells, with either single or multiple laterals. Recompletion in 2006 reached 172 wells, of which 47 were offshore. Workover wells reached 200 in 2006, of which five were gas wells. The remaining 195 oil wells include 69 offshore wells. Due to limited space, the author will cover only major expansions among Aramco’s 52 ongoing projects.

Manifa is an offshore heavy crude field. It is the world’s fifth-largest oil field. It was discovered in 1957, developed and produced, but later mothballed. Aramco signed a dredging contract for Manifa with Belgium’s Jan De Nul last February. Once completed in mid-2011, it will produce 900,000 bpd of crude, 90 MMcfd of sour gas, and 65,000 bcpd. Drilling will start at the end of 2009. The project includes building a new grassroots Central Processing Facility. To meet reservoir water-injection requirements, the project requires the construction of several offshore oil-producing and water-injection platforms, subsea crude and water injection pipelines, plus drilling sites. The project includes plans to build four major downstream pipelines, and terminal facilities at Ju’aymah and Ras Tanura.

Khursaniyah. A major development project that includes Khursaniyah, Abu Hadriyah, and Fadhili will bring another 500,000 bpd of Arab Light and 300 MMcfd of associated gas by the end of 2007. This project includes a grassroots,1-Bcfd gas plant and crude processing facilities.

Khurais is an onshore light crude field, fourth largest globally. Aramco will produce 1.2 million bpd of Arabian Light by 2009 from the latest increment. Sources said the project includes dehydration and compression of 450 MMcfgd, and expansion of seawater injection by 4.5 million bpd to support Khurais and Ghawar reservoir pressure.

Shaybah. Aramco has embarked on increasing the production of Arabian Extra Light crude oil from Shaybah by 250,000 bpd, by 2008. The field has produced 500,000 bpd since its completion in 1998. The expansion includes a gas-oil separation plant and various facilities for gas gathering, compression and injection.

Nuayyim. This field, discovered in 1990, contains 1 billion bbl. It will add 100,000 bpd of Arabian Super Light crude oil by 2008 to Saudi production capacity.

Safaniyah. This is the world’s largest offshore oil field, found by Texaco in 1951. It contains about 15 billion bbl of heavy sour crude and is the source of most of Saudi’s excess capacity. Safaniyah produces around 1.2 million bopd, and output will increase by 150,000 bopd. The expansion includes installation of 42 ESPs and a 3,000-ton tie-in platform.

Upstream gas joint ventures. After the failure of negotiations between the Saudi government and several major international oil companies, officials restructured the initial gas initiative, including three core ventures valued at $25 billion. Aramco formed four JVs with Asian, Russian and European companies. Aramco announced recently the seismic commitment programs for the First Exploration Period, with at least three considering above-minimum commitments. All four companies had drilling rigs on-site at the end of 2006. According to press reports, Luksar, a JV between Lukoil Overseas (80%) and Saudi Aramco (20%), made a discovery on the Tuckman structure in Block A, south of Ghawar.

Production. By varying its output up and down in the last two years, Saudi Arabia asserted its role as the world’s dominant oil producer that is willing to affect prices. Oil production decreased from 9.1 million bpd in 2005 to 8.9 million bpd in 2006. In recent months, Saudi Arabia varied its production in accordance with OPEC’s output cut. Saudi production has declined every month since last December, to reach 8.51 million bpd in March 2007. Aramco increased its maximum sustained production capacity to 10.7 million bopd and plans to increase capacity to 12.5 million bopd by the end of this decade. The objective is to maintain at least 2 million bopd of excess capacity. Excess capacity reached about 3 million bopd in February, most of it heavy crude, so the marketable excess capacity is only about 1 million bopd.

Saudi Aramco increased its gas production 4.5% in 2006 to reach 8.224 Bcfgd. Total delivered gas increased from 6.632 Bcfgd in 2005 to 6.858 Bcfgd in 2006.

Reserves. Saudi Aramco discovered 3.6 billion bbl of crude oil reserves in 2006, 4% more than it produced. Oil reserves stood at 259.9 billion bbl in 2006. Last year, 10.4 Tcf were added to gas reserves, bringing them to 252 Tcf, fourth in the world behind Russia, Iran and Qatar.