Saudi Aramcos plans to invest $40bn over the next decade on upstream operations may sound like it is spending a lot of money, but for any organisation with such vast remit would have to spend a similar amount.
Saudi Arabias oilfields are conventional with crude held in huge, easy to access reservoirs in a relatively small area of the kingdom. Even the offshore fields are located in the shallow waters of the Gulf and are close to shore.
However, most of Aramcos oil assets are maturing and the company is putting plans into place that will enable it to produce the maximum yield from each field. It would not be long before the kingdoms 12 million barrel-a-day (b/d) capacity will be tested if the foundations for enhanced oil recovery (EOR)techniques were not put in place early.
Investing in maintaining oilfields is not exactly cheap, but the main bulk of Aramcos $40bn is expected to be spent on doubling gas capacity.
Much of this new gas will come from non-conventional sources and shale and tight gas formations are difficult to access and expensive to exploit.
Strategies are being developed, especially tight gas formations, and Aramco claims the gas from these concessions will be cheap. Tight gas is found within sandstone rock, so the fracturing process is cheaper than shale gas, but there are still unresolved issues with water supply and infrastructure.
The near $20bn being lavished on the Jizan Economic City proves Aramco is willing to spend money on strategic operations that benefit the kingdom. In a decades time, it is likely the $40bn figure being mooted today is a fraction of what will actually be spent.