Saudi Aramco gears up for record oil production

Saudi Aramco's oil production capacity has reached 12 million barrels per day (bpd), which could allow it to set records for crude output once global energy demand recovers. The national oil company accounts for nearly all crude production in Saudi Arabia, the world's biggest oil exporter. "Production capacity of the company was 12 million bpd in June, when output started from three fields," said Khalid al Falih, the chief executive of Aramco, according to the Saudi newspaper Al Hayat. Those deposits included Khurais, at which production capacity was raised by 1.2 million bpd, or roughly seven-fold, in the biggest completed oilfield expansion project in the world. The field is located in the most prolific Saudi onshore oil-producing region, east of Riyadh, near the giant Ghawar field, which has the world's biggest deposit of conventional crude oil. The output capacity at Khurais was less than 200,000 bpd before the expansion, according to US government data. The other Saudi oil projects completed last month included a 250,000 bpd capacity expansion at the Shaybah oilfield, in the kingdom's remote Empty Quarter near its border with the UAE, which previously could produce up to 550,000 bpd. Aramco also developed an initial 100,000 bpd of output capacity at the Nuayyim field, south-east of Riyadh. In total, the three projects have raised Saudi oil production capacity by 1.55 million bpd or about 15 per cent. That has boosted the kingdom's spare capacity to a record 4 million bpd, as Saudi Arabia has led the way in delivering the record 4.2 million bpd of output cuts that OPEC pledged last year in an attempt to stem a steep slide in the price of oil. The Joint Oil Data Initiative, of which OPEC is a member, said Saudi Arabia produced 8.213 million bpd of oil in May, including about 300,000 bpd of natural gas liquids that are not included in its OPEC production quota. US government data show Saudi oil production peaked in 2007 at just over 10 million bpd, close to the level it had attained in the early 1980s. That was when the kingdom increased crude exports substantially to make up for a sharp drop in oil production in Iran, after that country's 1979 Islamic revolution and the outbreak of its war with Iraq. But Saudi output dropped by more than 60 per cent, to below 4 million bpd in 1985, because of cuts by OPEC in response to falling prices, before recovering to a plateau of about 8 million bpd in the 1990s. In 2007, amid predictions by "peak oil" theorists that Saudi output was about to decline, Aramco announced a bold plan to add more than 2 million bpd of new oil production capacity to bring the kingdom's total capacity to 12.5 million bpd this year. The company said a further 2.5 million bpd of additions were possible next year and in 2011, potentially bringing output capacity to 15 million bpd. Aramco has now delivered most of the increases promised for this year, even as global oil demand has fallen because of the economic crisis. Mr al Falih said the drop in oil demand was temporary and he predicted consumption growth would eventually resume. If the world failed to invest in new oil production during the downturn, global capacity would fall, causing another sharp rise in crude prices that could again destabilise the economy, Mr al Falih said. In the long term, Saudi Arabia planned to maintain spare production capacity of 1.5 million to 2 million bpd, he said. Yesterday, KazMunaigas Exploration and Production, a leading producer in Kazakhstan, said its crude output for the first half of the year was 3.8 per cent lower than a year earlier. tcarlisle@thenational.ae