Aramco delays Khursaniyah output rise

05 September 2008
Problems at associated gas plant stall plans for field to start full production of 500,000 barrels a day.

Saudi Aramco has again postponed the start of full production at its 500,000-barrel-a-day (b/d) Khursaniyah oil field because of ongoing delays to the construction of an associated gas plant.

It is the largest production increase to be planned anywhere in the world this year and its schedule has been derailed by a series of delays.

Oil started flowing from the first train of the oil field in the last week of August, two months later than planned. It is now expected to take several months for output to build up to the ultimate target of 250,000 b/d.

The second and final train of 250,000 b/d was initially expected to follow four to six weeks later but has now been put back until December, say contractors working on the project. “The second train will not start operations until late November or early December,” one contractor tells MEED.

This marks a one-year delay from Aramco’s original target of having full production by December 2007.

The latest delays are due to ongoing difficulties in developing a gas plant. The state oil giant gave Italy’s Snamprogetti until the end of August to complete a central gas-oil separation plant and wet-crude handling facility at Khursaniyah.

While that deadline is understood to have been met, contractors working on the scheme say an additional 1 billion cubic-feet-a-day (cf/d) gas plant is still several months away from completion.

The plant is being constructed to handle about 300 million cf/d of associated gas from each of the three parts of Khursaniyah. It emerged earlier this year that gas from the plant will initially be reinjected back into the Khursaniyah oil field rather than flared, as Aramco wants to avoid environmental damage from burning off the gas (MEED 27:6:08).

Aramco claimed in May that the bulk of crude output from the field could be easily brought on straight away. The following month, Amin al-Nasser, senior vice-president for exploration and production at the company, said the full 500,000-b/d increment from Khursaniyah would be ready to come on stream in August.

The incomplete gas facility means that if full production starts, gas will have to be burnt off.

One contractor says doubts are increasing within companies close to the project over whether enough light crude can be sourced from the field. “Saudi Arabia has been flaring gas for decades, so blaming the delays in bringing crude to the market solely on the gas plant sounds like an excuse to many working on this project,” says the executive.

Part of the delay on the gas plant hinges on a backlog of work and a shortage of parts to construct one of the central gas-processing components. The contract for the construction of the plant, which was awarded to the US’ Bechtel and France’s Technip in 2005, was one of the first to be awarded by Aramco on a convertible lump-sum turnkey basis.

The contract is the largest single deal agreed by Aramco on the development of Khursaniyah.

Bechtel and Technip took longer than expected to reach agreement with Aramco to convert the contract to a lump-sum turnkey basis. Under the original plan, conversion was expected to take place once 50-60 per cent of the engineering had been completed. In June, Aramco was understood to have agreed a final price of $3.6bn with the two companies (MEED 27:7:07).

Sources close to the two companies have confirmed that the plant is behind schedule.

Aramco had previously considered using other plants to process gas from Khursaniyah. The Berri gas plant, which handles output from the Qatif field and has capacity to process 1.24 billion cf/d of gas, was previously discussed as an alternative. However, Aramco decided not to take up this option.

The Hawiyah gas plant was also considered as a back-up but its own expansion to 2.4 billion cf/d from 1.6 billion cf/d is running behind schedule, with a July deadline having already been missed (MEED 20:6:08).

Aramco was unavailable for comment on the delays.

Saudi Arabia’s overall oil production capacity is expected to hit 11.8 million b/d from about 11.3 million b/d once the full increment is brought on line. In July, the kingdom promised to boost its output to 9.7 million b/d, one of its highest levels in decades.

The latest delay comes as Saudi Arabia aims to finally entice international oil majors to invest in its 400,000-b/d refinery project on the Red Sea coast at Jizan.

One official at the Petroleum & Mineral Resources Ministry says oil majors will receive full details of an incentives package, along with Riyadh’s request for proposals, on 6 September.

“There are financial incentives that already apply in the kingdom but we are also planning to offer our own specific advantages for investors taking part in this project,” says the official.

Earlier this year, Riyadh pledged to offer oil majors improved crude supply agreements and financial incentives to win support for its planned refinery, as well as the option of developing a petrochemicals facility alongside it (MEED 31:7:08).

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