State-owned oil company Saudi Aramco is considering developing its offshore Red Sea oilfields in a plan that could cost as much as $25bn to implement.

The plans are still at the early stages and seismic surveys have not yet been completed. However, sources in the kingdom say they are confident that there is enough oil in the Red Sea to sustain a massive development with offshore platforms, pipelines and onshore processing and bunkering facilities. Conservative estimates suggest that full development costs would be about $25bn.

“This is the next really huge project for Aramco, but the first real movement on this is not going to come for at least another two years,” says an oil industry contracting source based in the kingdom. “When it does come I expect it to be the major project for Aramco in the second half of this decade.”

Aramco has been conducting geophysical surveys of the Red Sea since 2009 and the surveys have moved progressively into deeper waters. The state-owned oil giant has not made any official announcements, but speculation is mounting that the Red Sea holds at least 100 billion barrels of proved oil reserves. This equates to a 38 per cent increase on Saudi Arabia’s current proved reserves of 267 billion barrels.

“If the [100 billion barrels] figure is correct, then spending $25bn is completely justified,” says the oil industry contracting source. “What is also interesting is that the Red Sea offers completely different challenges to the Gulf coast as it is deep water.”

Deep-water oil production means that companies with extensive operations in the North Sea in Europe and the Gulf of Mexico off the coast of the US will be well positioned to secure work when tenders are released. Both locations require technology and experience for exploiting oilfields with depths of more than 1,000 metres and this means specialist skills could be easily transferred.

“The Red Sea is definitely something we feel we could make a major contribution to and we are watching the developments with interest,” says a source from an offshore contracting company based in the Middle East. “But I think there will be several other contracts being tendered on the Gulf coast before that comes around.”

Saudi Aramco has around three years of seismic data to study and two crews have been working the area since 2009. Several areas have been the subject of 2D and 3D seismic studies to determine the sub-surface geological make-up of the fields. The local Arabian Geophysical and Surveying Company (Argas) has been carrying out the survey.

Early indications are suggestions that the port city of Duba in the Tabuk Province in the northwest of the kingdom could be the site of the onshore processing facilities. The city has a population of about 65,000, has a container terminal and runs ferry services to Egypt and Jordan.  

“Jeddah and Yanbu might be considered more likely areas to build processing facilities, but Duba also has a strong case,” says the oil industry source. “It already has a port and there is enough room to build a huge hub that will support the offshore development. For so much oil, Aramco is going to have to build facilities on a similar scale to Aberdeen.”

Aramco has extensive offshore experience on east coast and has produced oil from the Safaniya field for more than 50 years. Safaniya is the world’s largest offshore oilfield and the Aramco produces 1.2 million barrels a day of oil. However, the Gulf has some of the shallowest oil production conditions in the world and deep-water exploration, drilling and production offers sterner challenges.

“Doing anything at depth is difficult and obviously there are far more safety issues involved at 1,000 metres than at 30-40 metres,” says the offshore contracting source. “Laying pipes and transferring inventory to shore is also challenging, but Aramco is experienced enough to execute this properly when the time comes.”