x Abu Dhabi, UAEThursday 18 January 2018

Saudi Arabia stands by oil forecasts

Saudi Arabia is more than able to produce crude at levels claimed says a Saudi Aramco manager as he hits back at a WikiLeaks report.

Saudi Aramco says it has robust oil reservoirs, with almost a fifth of global supply. AFP
Saudi Aramco says it has robust oil reservoirs, with almost a fifth of global supply. AFP

RIYADH // Yousef al Furaidan, the production manager for one of Saudi Aramco's biggest oil projects, is unsure what more could be done to convince the world Saudi Arabia has the oil reserves, output capacity and spare capacity it claims.

The issue of Saudi oil data transparency resurfaced this month with the release by WikiLeaks of confidential cables from the US embassy in Riyadh urging Washington to heed a former Aramco executive's warning that the kingdom's reserves may have been overstated. The rekindled controversy has intensified as political tensions have erupted in parts of the Mena region, with anti-government protests now endangering oil exports from some Opec states including Libya.

Saudi Arabia, the biggest Opec oil producer, has felt only minor repercussions from the furore. However, to many New York oil traders, the kingdom's ability to compensate for supply disruptions elsewhere is again an open question.

But there is no sound reason for that, insists Mr al Furaidan. "Saudi Aramco has the most powerful [oil reservoir] simulator in the world. Our figures are very, very conservative. We are very confident of them."

And Dr Sadad al Husseini, the former Aramco production head cited by WikiLeaks, said this month he did not question the reported proved oil reserves and his "casual" 2007 conversation with a US consulate employee was misrepresented.

"In regards to Saudi Aramco's oil production capacity, the giant multibillion-dollar expansion projects which were funded in recent years are now all a visible reality for the whole industry to see," Dr al Husseini added.

What is certainly true, however, is that in 1982 Aramco started withholding data on individual wells.

Most private-sector oil companies also do this, but as the Saudi national petroleum company pumps more crude than any other oil enterprise worldwide, the change led to intense speculation by industry observers who were not necessarily technical experts.

They included the late Matt Simmons, the US investment banker who wrote Twilight in the Desert, a 2005 book postulating that Saudi oil output was about to peak. The book's central thesis was not borne out but continuing controversy over data transparency is far from trivial.

To Prince Abdulaziz bin Salman Al Saud, the Saudi assistant petroleum minister, access to reliable data on global oil supplies, stocks and consumption is a critical issue for oil consumers and producers.

It could help to stabilise oil markets by damping speculation, Prince Abdulaziz said on the eve of yesterday's International Energy Forum.

"The forum calls for a basic thing, which is transparency of data," he said. "If this is restricted, it would weaken the forum."

Mr Furaidan believes Aramco is setting an example of research-based clarity that other oil producers ought to emulate.

Current Saudi oil production and the kingdom's previous agility in responding to fluctuations in global oil demand reflect the reliability of the reported figures, he argued.

Since 2009, when a big increment in oil output from the supergiant Khurais oilfield and two small satellite fields came onstream, Saudi Arabia has maintained its oil production capacity at an unprecedented 12.5 million barrels per day (bpd), Mr Furaidan said.

Aramco accounts for 12 million bpd of that total, with the rest supplied by its joint venture with Chevron in the neutral zone separating Saudi Arabia from Kuwait.

Khurais, one of the biggest oilfields in the world, is estimated to contain about 27 billion barrels of light crude oil that could be extracted economically. The field accounts for almost 10 per cent of total Saudi proved reserves, estimated at more than 260 billion barrels.

In the largest single-phase oil expansion project in the oil industry's history, the 30-year sustainable output capacity from Khurais and its satellites was quadrupled to 1.2 million bpd in June 2009, from three years earlier. Output could be pushed to 1.4 million bpd or even 1.5 million bpd, Mr Furaidan said.

The project pumped 1.2 million bpd on its first day of operation, proving the stated capacity for Khurais was accurate. Since then, output has fluctuated according to market demand. On Monday, Khurais pumped about 960,000 bpd, up from about 700,000 the previous day.

Production from each of the more than 300 wells at Khurais is individually controlled by choke valves at each wellhead. The size of the valve openings are adjusted electronically from the project's control centre. From inside the octagonal building, a team of Aramco technicians constantly monitors and fine-tunes the field's performance.

Out in the desert, 270km south-west of Dammam on the Gulf coast, sophisticated instruments transmit real-time data on reservoir conditions from each well. The data is used to make short-term output decisions and continually update the reservoir models that are the basis for Aramco's reserves and spare capacity information.

"Every day we clock down-hole data and we use it for analysis. All over the country we maintain spare capacity in this way," Mr Furaidan said.

Because of the company's strict attention to reservoir monitoring, he is confident that between 50 and 75 per cent of the total oil in place at Khurais can be extracted.

Mr Furaidan is also confident the kingdom's current spare capacity after the completion of the Khurais project is at least 4 million bpd, as stated, and not a barrel less.

That is more than the total current output of Iran, the second-biggest Opec exporter.