When Saudi Aramco’s senior executives gather to assess key exploration and production data, one oil field dominates discussion. Ghawar, the world’s largest field, has a production capacity of 5 million barrels a day (b/d). Discovered in 1948, it is 280 kilometres long and 26km wide, encompassing 1.3 million acres.
As much as 65 per cent of all Saudi oil produced between 1948 and 2000 came from Ghawar, with cumulative production to the end of 2005 at 60 billion barrels. But Aramco has increasingly had to field questions over whether output rates at Ghawar are declining faster than the firm is prepared to admit.
The West has long fretted over the prospects of the field. The concern stems from a dearth of information about its mechanics, according to a Dhahran-based energy consultant. “This field alone has probably caused more consternation than any other in the history of oil because it is so vital to both the kingdom and crude supplies globally,” he tells MEED. “The slightest murmur of a problem from Ghawar seems to throw a lot of assumptions about Aramco into question.”
US energy consultant Bernstein Research agrees that the scant amount of information about Aramco fuels speculation. “Without accurate and detailed data on what Saudi Aramco is undertaking, or with a poor understanding of current Ghawar decline rates, many conspiracy theories have arisen,” says a research consultant. “They argue that we are on the cusp of global peak oil production.”
Recent concerns were sparked by a surge in drilling activity, heightening speculation that the work, being performed in older sections of Ghawar, is evidence of a push to arrest declines.
However, Bernstein Research says satellite images show that much of the rise in drilling activity has centred on several major expansion developments within the field, rather than keeping older parts of the field producing with enhanced recovery techniques. “The majority of the increased activity in the Ghawar field can be explained by the Haradh-III and Hawiyah natural gas liquids recovery megaprojects,” says the research consultant. “They were not designed as a quick fix to Ghawar’s supposed rapid decline.”
Sadad al-Husseini, a former exploration head at Aramco who worked on the original prospecting of the field in the 1970s, denies Ghawar’s production has declined. He says small changes in output are part of the normal variances of such a large reservoir.
“Aramco has conducted huge, long-term forecasts of these fields and the model has always been updated year-by-year depending on what information is received,” says Al-Husseini. “These models then guide future production. There is plenty of room [for production] to go up and down but these complexities come with a maturing field.”
Al-Husseini says some of the debate over Ghawar stems from the involvement of US companies in the field’s development before Aramco was fully nationalised in 1980. He says there was a huge reluctance by firms to “sweep the flanks” of the reservoir during initial drilling, meaning Aramco had to create a new simulation of the field after setting up its Exploration & Petroleum Engineering Centre (Expec) in 1982.
“There were a lot of tensions between us [Aramco] and some of the companies involved about squeezing too much capacity out of it [Ghawar],” he says. “It is not a homogenous field and produces different results in different parts.”
While questions remain over Ghawar’s prospects, other parts of Aramco’s upstream plans are falling into place. The $14bn programme to expand production capacity to 12.5 million b/d from 11 million b/d by 2009 is testing the company, but observers say it is on track. “Aramco is stretched to the hilt both upstream and downstream but will still meet its targets,” a Dammam-based contractor who works for Aramco tells MEED.
With a worldwide shortage of drilling rigs and contractor materials, questions have been raised about the feasibility of Aramco’s plans. It has answered its critics by launching what it calls “the most aggressive expansion of drilling activity in the history of the oil industry”.
In 2004, it decided to double its drilling fleet from just 55 rigs to more than 120 by the start of 2007. As a result, in 2006 it drilled about 60 per cent more development wells than in the previous year. Building on this, 2007 is expected to result in an 80 per cent jump, according to the Dammam contractor, who says Aramco is warning the supply chain of upcoming work.
“Aramco is very clear on its needs compared with some of the other national oil companies in the region,” says the contractor. “It put out a clear message to the oil [service] companies that it is looking to sign new medium-term contracts of three to four years, and this has placed it in a healthy position as we go into 2008.”
Drilling contractors are understood to have been offered the prospect of rolling deals to secure their services into the next decade.
Aramco’s apprehension in retaining sufficient services is understandable. Its 2009 target represents the first phase of a wide push to keep bumping up capacity over the next 25 years.
The International Energy Agency predicts Aramco could push up its crude production to 18.2 million b/d by 2030, which it estimates would cost in excess of $140bn. The US-based energy watchdog says there are still at least 70 fields to be developed, which are thought to contain an additional 26 billion barrels of reserves.
Al-Husseini tells MEED that although much of the easy oil has been drained from the kingdom’s reservoirs, there is still widespread optimism within Aramco over a series of medium-sized onshore fields that were originally mothballed by Aramco in the early 1990s and now form a crucial part of the expansion drive.
Khurais, Khursaniyah, Abu Hadriya, Abu Jifan and Harmaliya were all put on hold at various times. Khurais is now expected to be a valuable asset for Aramco. As part of an $11bn project, more than 20 rigs have been commissioned to drill more than 400 wells, with estimates that 1.2 million b/d of Arabian Light crude will come on stream by the summer of 2009.
Elsewhere, the Khursaniyah field, with targeted output of 500,000 b/d, is due to start production in early 2008 despite rumours of delays.
Looking further ahead, heavy oil production will increase, and this is due to start from the giant Manifa field by June 2011 at a projected rate of 900,000 b/d.
Al-Husseini says the next exploration challenge for Aramco is securing additional reserves from its lesser-known fields. “It is easy to capture the big fields but to capture the hundreds of smaller fields, you need a very refined exploration programme,” he says. “That is the challenge of the next decade.”
With Aramco always monitoring the need to replace reserves, the next exploration phase is likely to be a challenge it is already mapping out.
Selected Saudi oil fields
Medium-sized oil fields put on hold in the 1990s such as Khurais and Abu Jifan will form a key part of the expansion drive.