Saudi Arabian Oil Co. (Saudi Aramco) is making “massive investments” as it seeks a production buffer to guard against swings in global oil prices while addressing a decline in output from its older fields.
"As part of our drive to become the world's most integrated energy company, we have increased our annual capital budget tenfold from $4 to $40 billion in the last 10 years," its Chief Executive Khalid al-Falih told the 22nd World Energy Congress on Monday in Daegu, about 300 kilometers southeast of South Korea's capital.
In the past two years, the company has increased production by more than 1.5 million barrels a day in order to address market supply imbalances and it continues "to make massive investments to maintain the world's largest spare oil- production capacity of more than two million barrels per day," he said.
The world's top oil exporter plans to invest $35 billion over the next five years in crude-oil exploration and development in a bid to keep its oil production portfolio robust, al-Falih added.
Aramco plans to maintain spare output capacity of more than 2 million barrels a day, he further said. Al-Falih.
“We are on track to increase the average of our conventional oil recoveries to 70 percent, which is more than double the current world average,” al-Falih said. “Resources are, in fact, abundant.”
Global crude reserves, estimated at 1.6 trillion barrels, are equivalent to half a century of production at current rates, according to al-Falih.
Demand will rise by about 20 million barrels a day over the next two decades, he said. Daily consumption is forecast at 92.1 million barrels next year, the International Energy Agency said in an Oct. 11 report.
Saudi Arabia has the largest portion of spare capacity within the 12-member Organization of Petroleum Exporting Countries. Maintaining a cushion of unused production allows the Kingdom to raise output to meet supply shortfalls and potentially limit price spikes.
“OPEC nations, and especially Saudi Arabia, will continue to meet all supply needs,” Ibrahim Al-Muhanna, senior adviser to the Minister of Petroleum and Mineral Resources, said Monday in a speech at the triennial conference.
“Saudi Arabia will continue to be the supplier of last resort.”
Moreover, Aramco started developing so-called unconventional gas resources two years ago and is ready to begin supplying a 1,000 megawatt power plant in the country’s north with fuel set to be produced through that program, al-Falih said.
Saudi Arabia will maintain its output capacity at 12.5 million barrels through new fields including the offshore Manifa deposit, according to Al-Falih. Saudi Aramco also plans to add 550,000 barrels a day of capacity from the Shaybah and Khurais fields by 2017.
Aramco will have more light crude for export once the new deposits start producing, Al-Falih said. The heavier output from Manifa is earmarked for new joint-venture refineries the company is developing in the coastal towns of Jubail and Yanbu.
A third oil refinery the company is building at Jazan will be completed by late 2016, Al-Falih said. The facility will produce products from light and medium crudes for export.
The company plans to build a 3,000 megawatt power plant at Jazan, he said. It awarded the contract for the supply of the turbines to Siemens AG in August. A residue gasification unit will be added at the refinery.
This article was first published in Saudi Gazette on Oct. 14, 2013.