Production peek

A closer look at Saudi Arabia's hydrocarbon profile with statistical analysis by Business Monitor International.

Saudi Arabia's critical importance to the world energy landscape should not be underestimated. With one-fifth of the world's proven oil reserves, it is the biggest oil producer in OPEC, and the world's largest net oil exporter.

The country still relies heavily on its oil and gas reserves, and plans to increase oil production capacity in the coming years - a welcoming revelation in today's rapidly changing energy market.

Oil and gas reserves

In April 2004, officials from Saudi Arabia's oil industry announced that the Kingdom's previous estimate of 261billion barrels of recoverable petroleum has more than trebled, to 1200 billion barrels.

The country's oil minister announced during the recent World Petroleum Congress that Saudi Arabia would soon be able to boost proved reserves of 264 billion barrels by a further 200 billion barrels.

While the country's ultimate potential may indeed be well above current industry estimates, there has been little change to the recognised third-party reserves assessment of 264.2 billion barrels (BP Statistical Review or World Energy June 2008).

BMI sees scope for this to edge higher to 295bn by 2012, unless the Saudi authorities can convince external observers of the much higher resource base they claim.

Saudi Aramco stated in March 2007 that its reserve replacement ratio stood at 106% in 2006, with the discovery of 3.6 billion barrels of new oil reserves.

Gas reserves of an estimated 7170 billion cubic metres are forecast by BMI to increase to 7500 billion cubic metres by the end of the forecast period, assuming that the current IOC-linked exploration initiatives are successful.

Oil supply & demand

Saudi Arabian crude supply in June 2008 averaged 9.45 million barrels per day, reaching the highest production level since March 2006. The increase came in the aftermath of Saudi claims of higher post-maintenance demand from US refiners.

Saudi Arabia's representatives said that July production could be raised to 9.7mn b/d, and preliminary reports of regional tanker sailings do suggest some additional increase in July Saudi production.

Oil Minister Ali al-Naimi has also suggested that the Kingdom is considering a second phase of upstream capacity expansions, which could potentially take capacity to 15mn b/d after the phase one target of 12.5mn b/d is reached at end-2009. However, a key condition was that there should be clear signs of long-term demand for the extra volumes.

The Minister suggested that each of these capacity expansions could be completed within three years of project sanction. The key projects are: Zuluf (Arab Medium) - 900 000b/d; Safaniyah (Arab Heavy) - 700 000b/d;  Berri (Arab Extra Light) - 300 000b/d; Khurais (Arab Light) - 300,000b/d; and Shaybah (Arab Extra Light) phase 3 - 255 000b/d.

The Khursaniyah programme, which will also produce more than 3bcm per annum of gas, will develop production facilities for the onshore Khursaniyah, Abu Hadriya and Fadhili oil fields near the city of Jubail on Saudi Arabia's Persian Gulf coast.

In spite of spare capacity, combined Saudi crude oil and gas liquids output is expected to remain broadly under OPEC guidelines, perhaps reaching 11.78mn b/d by 2012 as world demand rises - with capacity rising to a possible 13.5mn b/d. Crude oil and gas liquids exports should therefore average around 8.68mn to 9.31mn b/d in 2008-12.

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