Saudi Aramco is poised to sanction an ambitious five-year plan, boosting its fresh drilling activity by a third and increasing investments levels by 40 per cent, despite Riyadh claiming it has no plans to increase crude capacity before 2020.
A final version of Aramco’s plan, which runs from 2009 to 2013, is expected to be approved by the company’s board and the Oil Ministry by mid-May, following a six-week review of the draft proposal.
Details of the plan have not been officially announced but have been revealed to MEED by sources close to the state oil giant.
Under the programme, Aramco will bolster the number of wells drilled around the kingdom by a third to 248, compared with an original target of 187. Investment on projects will be increased to $13.7bn from $10.7bn under the draft plan.
Much of the increase in drilling activity will be aimed at sustaining the kingdom’s production target of 12.5 million barrels a day (b/d), which it expects to reach by the end of 2009.
However, given Saudi Arabia’s success in both discovering fresh finds and redeveloping previously mothballed fields such as Manifa, it appears the world’s largest oil firm may seek to boost capacity beyond 12.5 million b/d regardless of its stated view on global demand for oil.
Saudi Arabia’s Oil Minister Ali al-Naimi recently said that as long-term oil demand forecasts fall and alternative fuel supplies rise, there is no need to go beyond next year’s production capacity level. The kingdom has previously said it could take its production capacity up to 15 million b/d.
The plan also includes a $4.1bn commitment to upgrade existing facilities at the kingdom’s landmark Ras Tanura refinery, compared with an initial investment of $2.39bn.
Aramco recently cancelled a planned 125,000-b/d refinery upgrade at Yanbu, increasing speculation it is considering a partnership with Saudi Basic Industries Corporation (Sabic) to integrate the refinery with a petrochemicals plant (MEED 28:3:08).
However, the budget for some plans has been cut. The oil giant has committed $1.45bn to the Karan gas facility to hit prod-uction of 1.5 billion cubic feet a day (cf/d) by 2012. This marks a $50m drop from its previous budget and comes despite rapidly rising demand for gas across the region, which has provoked concerns over a potential shortage of supply for industrial users and power plants.
In Saudi Arabia alone, natural gas demand is expected to reach 14.5 billion cf/d by 2030, compared with the current 5.5 billion cf/d (MEED 4:4:08).
The national oil company will spend $2.58bn on offshore maintenance and new drilling, compared with $2.25bn previously, marking a new emphasis on the kingdom’s offshore fields.
Italian oil services contractor Saipem, which is engaged in billions of dollars worth of work for the company, says Aramco has identified the development of its offshore fields as a priority.
“According to Aramco, the offshore in Saudi Arabia is as promising as the onshore,” says Pietro Franco Tali, president of Saipem. “They see the future in the offshore and they are saying they have big hopes for the offshore.”
Much of Aramco’s offshore development has focused on the Safaniyah, Marjan, Berri and Zuluf fields, but further devel-opment is needed, mostly to provide relief to the ageing Ghawar field, the world’s largest onshore field.
Aramco has devoted $1.15bn for maintenance of Safaniyah, the largest offshore oil field in the world, which boasts production of about 1.7 million b/d. It includes the installation of 67 kilometres of crude transmission lines, along with a substation and an offshore sub-sea cable.
Although relatively little is known about the potential of Aramco’s planned offshore projects, Tali says there is no reason to doubt its intentions and investment.
“I tend to believe they are right because Saudi Aramco is very prudent, very conservative and each time I go there they spend most of the time talking of the offshore,” says Tali.
Saipem, which signed a long-term agreement with Aramco through its subsidiary Snamprogetti last year, is hopeful of extending the $400m deal it made, as a result of Aramco’s capital expenditure commitment.
“We have agreed a minimum quantity of platforms and pipelines whose value is around $400m, but we believe the potential is much higher,” says Tali. “If the Saudis are right in the offshore, they should find a quantity of oil that will be Saudi standard. We could be talking something big.”
Other parts of the five year programme include a $3bn investment to cover maintenance work and drilling on Aramco’s onshore fields, compared with a previous estimate of $2.2bn.
Along with the increase in the number of wells being drilled, about 450km of additional in-field flowlines for processing at the central Abqaiq facility will be constructed.
One Dhahran-based executive close to Aramco says the board is due to meet at the end of April to approve the final five-year plan, having already held a meeting earlier this year.
“The sums are impressive and show that Aramco will keep driving forward its exploration, production and investment to stay on top,” says the executive.