Saudi oil expansion plan �may face delay� Posted: Thursday, November 10, 2005
Saudi Arabia may fall behind its schedule to raise output capacity by 1.5 million barrels per day (bpd) by 2009 due to shortages of oil rigs and equipment, said a former top official at Saudi Aramco.
Sadad Husseini, a key architect of Saudi energy production policy for more than a decade, said the kingdom has the oil in the ground, political will and cash to ramp up output.
But a shortage of equipment could leave state oil firm Aramco two-to-three years behind its plan to lift capacity to 12.5 million from 11 million bpd now.
'What we are hearing is that contractors are very, very stretched as is the availability of rigs and equipment. They may wind up being two to three years behind schedule,' Husseini said.
'The industry does not have the resources required.'
Riyadh has fast-tracked a $50 billion scheme to keep pace with booming demand and maintain up to two million bpd of oil production in reserve.
It intends to boost output by 3 million bpd by 2009, with half that volume going to increasing output capacity and the other half to make up for depletion rates at older fields.
'Every new increment is going to be more expensive and complex and yield smaller amounts,' said Husseini. 'And you will have to replace easy production and large capacity declines with much more difficult production.'
In addition, increases beyond 12 million bpd will involve heavy and medium crudes that are difficult for the global refining system to process, he added.
Saudi Arabia, which has been pumping around 9.5 million bpd, has offered to boost its output to 11 million bpd if needed, but there have been no takers.
The International Energy Agency, energy adviser to industrialised nations, this week said the kingdom might need to pump as much as 18 million bpd by 2030 to meet booming demand.
But Husseini, who retired from Aramco in 2004, warned against pushing Saudi oilfields too hard, too fast.
He said the best way to make use of Riyadh's oil reserves, the world's biggest, was to limit pumping rates to 13.5 million bpd over the next 20 years.
'It is not clear why in the next 20 years Saudi Arabia would want to go above 13.5 million bpd with all its technical risks and consequences,' the veteran geologist said. 'People who say otherwise are using very simplistic assumptions and are not talking about how production can be sustained.'
Riyadh can raise output beyond 13.5 million bpd, but undeveloped reservoirs would have to be tapped. And that accelerates the depletion of reserves and reduces the life of the sustainable production plateau.
'For example, if the kingdom were to increase its production from 10 million barrels to 18 million barrels by 2030, it will have consumed 63 per cent of its proven reserves,' he said.
'Most of the industry's professionals would not consider it possible to reach such high production levels with such mature reserves.'
Husseini said 10.6 million bpd would, for now, be a 'safe production rate' that would not harm Saudi reservoirs.
Oil Minister Ali Al Naimi has said the kingdom was working to boost its proved reserves by 200 billion barrels from 264 billion now.
I have been hearing for about two years how Saudi was going to "ramp up" and increase production. I suppose it is possible, but after two years one has to wonder why it has not been done. How much of this is just BS?