Nick Snow
Washington Correspondent
WASHINGTON, DC, July 1 -- Saudi Arabia has 260 billion bbl of proved oil reserves that it can bring to market to meet its goal of increasing production to 12 million b/d by 2009 from the current 10.5 million b/d, a Saudi Aramco official declared in Washington, DC.
"If market conditions justify it, we are prepared to go to 15 million [b/d], a level we believe not only can be achieved, but maintained for decades to come," said Khalid Al-Falih, Aramco's senior vice-president, gas operations.
"These numbers are real. They represent recoverable amounts," Khalid said of the estimated 260 billion bbl of proved oil reserves. The kingdom has another 100 billion bbl of probable reserves and still more potential resources, he said June 29 during a presentation at the Center for Strategic and International Studies.
Clearing away doubts
Although Khalid did not mention Houston consultant Matthew R. Simmons by name, Saudi Arabia has tried to reassure consuming nations that it will continue to be a reliable supplier since the Simmons & Co. International chairman questioned its ability to do so at the Norwegian-British Chamber of Commerce on April 27.
Among the concerns that Simmons expressed were that none of the supposedly known facts about Saudi Arabia's reserves have been verified by third-party audits or field-specific data. Five "extremely mature" oil fields represent 90% of the kingdom's production, while three "lesser giant oil fields" produce another 7%. "All are at risk of unplanned production collapse," Simmons said.
Not every energy forecaster shares his concerns. G. Daniel Butler, a market analyst specializing in long-term forecasting at the US Energy Information Administration, said that the US government's energy analysis group's latest forecast to 2025 estimates Saudi reserves are sufficient to produce "certainly in the 15 million b/d range, and, late in the forecast period, in the 20 million b/d range."
Khalid said, "We have demonstrated, through 70 years of performance, our ability to meet commitments, and will continue to do so in the decades ahead. We will invest not just in spare capacity, but capacity to supply the grades that the market needs."
The country's estimated proved reserves represent 25% of the world's total, he said, with a depletion rate of only 28% from 85 fields and 320 reservoirs. Saudi Aramco takes a long-term approach to reservoir management and uses "cutting-edge technologies," Khalid indicated.
Maximizing recovery
"We use technology to maximize ultimate recovery. Our working goal is to leave no barrel behind," Khalid maintained.
He said that forthcoming production additions include another 300,000 b/d from the Haradh field in 2006; 500,000 b/d from developments at the Abu Hadriya, Fadhili, and Khursaniyah fields in 2007; 200,000 b/d from the Shaybah field; 100,000 b/d from the Nuayim field; and 1.2 million b/d from the Khurais field in 2009. More production increments are scheduled from 2010 on, he added.
Khalid said that Aramco also plans an ambitious domestic exploration program targeting both oil and gas that will move offshore for the first time as well as continuing onshore. Activity will be stepped up to 100 exploratory wells and 90 delineation wells, using seven seismic crews and 20 million vibration points, he said.
Exploration, which previously targeted gas, will emphasize oil and gas equally. "At a minimum, we want to replace liquids production and maximize liquid reserves additions," Khalid said.
The kingdom intends to identify 5 tcf/year of nonassociated gas reserves by building on its gas exploration joint ventures with Royal Dutch/Shell Group, Total SA, OAO Lukoil, China National Petroleum & Chemical Corp. (Sinopec), Eni SPA and Repsol YPF SA.
It anticipates close to $9 billion of investments for gas system growth. But it plans to use additional gas production to build domestic industries instead of exporting it, Khalid emphasized.
Refining capacity
Khalid said that Saudi Arabia also plans to increase its export refining capacity to help correct what it sees as a mismatch between available crude supplies and downstream processing capacity worldwide. The kingdom hopes to have a major outside investment partner lined up by yearend and the expansions completed by 2010.
Investments will include more than $8 billion to convert the Rabigh refinery from a topping to a full conversion configuration including petrochemical capacity, according to Khalid. "We're pursuing refining and petrochemical integration opportunities at our other refineries," he said.
Saudi Aramco also has taken steps for some time to protect its operations from sabotage. "If you'd visited our plants 30 years ago, you would have seen they were already secure with double-fences and well-lit perimeters. We are prepared for the worst, but hope the best," Khalid said.
The national oil company is pursuing refinery investment opportunities overseas, including China, where it already is involved in a joint development project with Sinopec and ExxonMobil Corp.
Khalid noted that Ali I. al-Naimi, the country's minister of petroleum and mineral resources, has made it clear that the kingdom would increase its US refining investments if permitting issues are addressed and the right commercial conditions exist.
"This is a key market for Saudi Aramco, and we intend to make it grow," Khalid said.
Overseas investment will not extend to exploration and production, he added. "With the kind of resources and reserves Saudi Arabia has, we have no intention of making upstream investments in other countries," he said.
"Oil is a depletable resource. Ultimately, production will peak, even in Saudi Arabia. The question is timing. I'm not an expert on conditions elsewhere, but I can assure you that even with 12 million or 15 million b/d scenarios, we're not going to peak anytime soon," Khalid declared.
Contact Nick Snow at [email protected].
