Saudi Arabia Opens Giant Oil Field
From The Economist
Saudi Arabia has just announced the start of production at the giant Khurais oilfield, which will push up OPEC”s total spare capacity to about 8% of world oil consumption. However, the event has done little to check the recent increase in oil prices, which have edged over US$70/b for the fist time since October, with the market apparently impressed by BP”s revelation that the world”s oil reserves shrank by 3bn barrels in 2008, as well as by faint indications of a recovery in demand.
The Khurais field has the capacity to produce 1.2m b/d of Arabian Light crude, and is the final element in Saudi Aramco”s plan to increase its capacity to 12.5m b/d by end-2009 (although there remains some doubt about the AFK field, which started up last year but which has had persistent teething problems; the International Energy Agency has complained that Saudi Arabia has been rather vague about its new oilfield start-ups). The company”s next big oilfield development is Manifa, a mainly offshore field that is scheduled to start up producing about 1m b/d in 2013. Some of the heavy crude from Manifa is likely to be processed through a new export refinery that Saudi Aramco is building in Jubail in partnership with France”s Total, and for which some US$10bn worth of construction contracts are expected to be placed at the end of this month.
What investment slowdown?
The completion of Saudi Aramco”s oil capacity expansion programme more or less on schedule, and the progress being made with both the Jubail refinery and the multibillion dollar Karan gasfield seem to belie the concerns that have been expressed about a slowdown in investment. Indeed, the fall in prices of equipment and services required for such projects appears to have prompted something of a revival in investment, at least in the Middle East and North Africa-the first tenders have just been issued for an estimated US$10bn sour gas development in Abu Dhabi, Algeria”s Sonatrach and its international partners have reeled off half-a-dozen major oil and gas contract awards over the part two months, and Egypt had a notably strong response to its latest exploration bid round in May.
Khalid al-Falih, Saudi Aramco”s president and chief executive, said that while there has been no question about Saudi Arabia”s commitment to maintain investment levels, he did have concerns that the sharp fall in oil prices at the end of last year would affect the plans of other players. He suggested that the rise of the oil price to “reasonable” levels of over US$70/b would stimulate a general increase of investment around the world.