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Updating Saudi oil production plans
Posted by Heading Out on August 9, 2005 - 5:41am
The attached rough map is derived from one in the OGJ and shows the current oilfields along the Saudi coast, with those contributing to production shown in gold. (To give a sense of scale the island of Bahrain at the bottom is about 30 miles long).Questions upon the likelihood of the world being able to match oil supplies with demand, usually devolve onto how much oil will be exported from Saudi Arabia. Just this last week the EIA site describing that country was updated, following the accession of King Abdullah.
Among the things to note are:
In June 2005, Saudi Aramco's senior vice president of gas operations, Khalid al-Falih, stated that Saudi Arabia would raise production capacity to more than 12 million bbl/d by 2009, and then possibly to 15 million bbl/d "if the market situation justifies it." Falih added that by 2006, Saudi Arabia would have 90 drilling rigs in the Kingdom, more than double the number of rigs operating in 2004.Since a check on the number of active drilling rigs has shown only about 30 rigs actually drilling, until recently, this is a sign that they are getting serious about meeting that commitment. To digress just a little, however, J drew attention to the recent contract that will take 5 offshore rigs, from the Gulf of Mexico to Saudi Arabia at the end of the year.
The interesting thing is that if we look at the announced plans to increase Saudi oil production, the extra oil is to come from the following fields;
Haradh - 300,000 bd, due in February, 2006
Khursaniyah 500,000 bd, due in late 2007
Shaybah - 500,000 bd, due in 2008 (this is down in the Empty Quarter)
Khurais - 1,200,000 bd, due in 2009.
and Nuayyim - 100,000 bd, due in 2009 and which has been added since the initial announcement about increases in production. (This is almost due South of Riyadh and off the previous map, and may be a part of the initiative to open up the Central Arabian fields.)
All all these sites are on land (see earlier map here and current map of the offshore fields). None of the increased production is to come from offshore. So why are they bringing in these platforms?
The answer lies in another quote from the EIA page.
One challenge for the Saudis in achieving this objective is that their existing fields sustain 5 percent-12 percent annual "decline rates," (according to Aramco Senior Vice President Abdullah Saif, as reported in Petroleum Intelligence Weekly and the International Oil Daily) meaning that the country needs around 500,000-1 million bbl/d in new capacity each year just to compensate.These numbers have been much discussed, in earlier posts here and conjectured about by a number of authors. But this is an upgraded set of values and I will write more on this in a specific post, following this one. But it is worth noting that this drop will require an significant number of additional new wells each year, over and above the new production wells. And in light of our earlier comments this is where the extra 60 drilling rigs will come into play. (60 rigs x 6 wells per year x 3,500 bd per well, is close enough to 1 mbd per year of new production).
As for the drilling rigs from the Gulf, they will most likely be used at Safaniyah and Marjan, since the Qatif and Abu Safah fields that were brought on line this year are still a little early to see much depletion and also will likely still have the drill platforms there that were used for the initial increase in production.
It should also be remembered that about 2 mbd of Saudi production is now used internally, and the EIA page shows a steady increase in that demand.
The contract to start the Khurais development, due on stream in 2009, has just been given to Foster Wheeler Energy Ltd.
To repeat the numbers from a couple of earlier posts that specify the totality of Saudi Production. According to Cordesman and the CSIS
they intend to bring production up to the following numbers
Abqaiq - 400,000 bd
Ghawar - 5,500,000 bd
Berri - 400,000 bd
Safaniya - 1,500,000 bd
Abu Sa'fah - 300,000 bd
Zuluf - 800,000 bd
Marjan - 450,000 bd
Haradh - 170,000 bd
Shaybah - 500,000 bd
Munifa - 1,000,000 bd
This gives the 11 mbd that they claim to be able to currently produce - though it includes Munifa, of which we have commented negatively earlier.
When this is added to the new production outlined above, and when you include an anticipated 800,000 bd loss due to old fields declining, the sum comes in just over the required number.
What it does not do is include more than one year of current declines in production from the existing fields (and again this might be the role for the new rigs being brought in).
An earlier estimate of production in Saudi Arabia at the beginning of the year was as shown below, with the flow given in thousands of barrels a day (kbd):
Abqaiq 400 kbd;
Abu Sa'fah 200 kbd;
Berri 300 kbd;
Ghawar 4,500 kbd;
Hawtah 200 kbd;
Hout 300 kbd;
Khurais 300 kbd;
Marjan 270 kbd;
Qatif 800 kbd;
Safaniya 700 kbd;
Shaybah 600 kbd; and
Zuluf 500 kbd.
This adds up methinks to 9.07 mbd.
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This field is the world's 2nd largest producer after Ghawar.It's production is currently 1.9 million bl/da(64% of Mexico's total prod).Pemex has announced that this field has reaced it's peak(2.1mm bl/da) and will decline at a rate of some 14%/yr starting now. Spooky.
Opps forgot the title
Peak Oil-Mexico's Cantarell
Thats what happens when you steal someone elses work:)
I seem to remember seeing figures just recently that suggest that the decline has already started.
Will these increases be possible? It doesn't seem likely. Here's what Twilight in the Desert has to say about the fields HO mentions:
Haradh (part of Ghawar) -- "Haradh is, indeed, a far cry from 'Ain Dar or Shedgum. The permeability at the bottom of Ghawar is very low. . . . This field or region has finally become an important target for new production to offset the anticipated decline of Ghawar's highly prolific northern end. . . . Haradh may now be Saudi Arabia's best hope for future oil output." (pp. 176-177)
Khursaniyah -- "In 1979, oil output surged to a peak production rate of 208,000 barrels a day. . . In 1982, Khursaniyah's production had declined further to 107,000 barrels, about half its 1979 peak. Khursaniyah's proximity to all of Saudi Arabia's giant carbonate oilfields suggested that the field should have replicated the productivity of the Berri and northern Ghawar oilfields. For one reason or another, however, Khursaniyah was not destined to achieve such stellar performance. Its productive zones lacked the exceptional permeability and porosity of Saudi Arabia's best fields." (p. 221)
Shaybah -- "Shaybah is a notable example of how costly it is becoming for Saudi Arabia to keep its oil miracle alive. There is nothing either simple or inexpensive about Shaybah. Given the large gas cap, it seems likely that at some point the incremental oil recovery will become incidental compared to the value of the gas." (p. 210) 500,000 bd for 30 years? "Anyone can forecast anything. It is up to the listener to judge whether the claim is based on hope or reality. We have no petroleum science that can predict anything with precise certainty that far in the future, let alone oil flows in a reservoir as complex as Shaybah." (pp. 210-211)
Khurais -- "In 1981, . . . Khurais produced a record 144,000 barrels a day. This was likely Khurais' all-time peak output. . . . Given the large number of wells drilled throughout the Khurais field and the erratic production history in the 1970s and 1980s, some people at Aramco must have had second thoughts [about developing this field]. . . . The fact that Aramco announced that this project was almost ready to proceed, only to quickly reverse itself and question whether a major expansion would actually go ahead, seems to signal the serious nature of the difficulties and challenges the Khurais expansion faces." (pp. 213-215)
Nuayyim (part of the Hawtah Trend fields) -- "Development of the newest fields in Saudi Arabia quickly degenerated into a continuous series of negative surprises. . . . Time and an increasing amount of integrated technical data showed with discouraging clarity that the Hawtah Trend bore little resemblance to even the most difficult of the great Saudi oilfields further east." (p. 225)
Interloafer, thanks for taking the time to put those quotes up - they highlight some of the problems
This is an entirely random, off-topic comment but I wanted to thank the management for not only providing this most excellent and important service but also linking to a feast of progressive blogs (that is free of the usual partisan Democratic claptrap).
I'm an incorrigibly cynical second wave geneation xer who came of age politically (in high school) as a leftist (not a liberal) at the end of the 1980s and the early 1990s. I watched the Democratic Party castrate its last honest men, and spend the rest of the decade publically and ritualistically humping the legs of every dumbass police statist and corporatist in suburban America.
I have little patience for chomsky quoting morons who think their politics are anything less than impossible, anymore than I have patience for neo-nationalist wankers who expect me to get a hard on over the fact that the corporatist pseudo-democracy we're merrrily building in Iraq is better than the authoritarian nightmare that was Saddam Hussein's regime. I guess its better to get beat over the head with a baseball bat and survive than to be slowly boiled to death in a vat of hot oil but you can appreciate perhaps how I may be disinterested in either prospect.
I have little faith that the Democrats will control the White House anytime in the next fifteen years, and that when they do they (and this includes the so-called reform wing) won't sell us out by executing more retards, selling off the government to the highest bidder, and selling out the middle class and America's most vulnerable. And who knows: maybe the next go round they won't just deny felons student loans but housing, food, and water as well. Let them eat each other.
What I need is a brutally honest, unspeakably bright, and tirelessly cynical leftist blog that tells it like it is. I've spent two years in the liberal blogosphere and I'm hungry and tired.
Current numbers show Opec (without Iraq) increasing production in July by only 40,000 b/d over June production.
Saudis are flat from June and still down slightly from their May production. And they're supposed to be the ones with "spare" capacity.
link
I wonder if Iran decided to start throwing its weight around and unilaterally cut production right now they could achieve many objectives: First expose the fact that the Saudis have no spare capacity, make the West back off of the nuclear issue which is really all about the same thing - everyone is desparate for energy supplies.
I know it's too simplified a look at it:
Right now Iran is pumping 4 million bpd. 4 * 60 = $240 million per day if they get the full price.
In February Iran was pumping 3.93 million bpd. 3.93 * 48 = $188 million per day approx
So they can either enjoy a windfall of of $52 million per day, or they can cut production and keep their revenues steady while conserving a resource which will (chances are) only increase in value.
Does this make sense?
They could cut back to 3.2 million bpd at current prices and still make just as much revenue as they did six months ago, and simultaneously insure that prices stay high because there is less oil on the market. Isn't that the whole point behind OPEC's quotas?
(please correct my assumptions or math, somebody, like I said this was a very simple back of the cocktail napkin computation)
In the electricity crisis here in California a couple of years back, we had all these suspicious maintenance interludes in power plants. It turned out later that some companies were deliberately faking it - by cutting off part of their supply, the overall market price went up enough that they made more on the rest of their supply than if they had supplied in full. I wonder under what circumstances the same thing is true in the oil market? (I don't have a very clear understanding of what features of the CA electricity market made this possible).
Stuart.
There are some refineries that are having problems, because they are running at just about full capacity, and over time that is not a good idea. And they do, realistically, need maintenance, though plants try to schedule this in the off season, (and from now on we are in the demand phase of the cycle).
Ben,
You math is basically right. As I mentioned on another thread, Iran is not getting $60 per barrel since that is the price for the most expensive crudes. The average price for Iran's benchmark heavy crude was $52 in July (DOE), but I don't know if that is representative of Iran's crude production. This doesn't change your point.
I heard a presenter from PFC Energy imply that Iran has more cash reserves than Europe has oil supplies. If Europe embargoed Iran and Iran embargoed back, Eurpope would fold first. Of course oil is a fungible commodity and it wouldn't be that simple. The point remains that Iran has a lot of cards.
Heading Out - Capacity utilization is one of the two key indicators of refiery profitability. The other is gross refining margins (GRMs). Refiners are delighted at running near full capacity. I have heard that many US refiners have run at as much as 103% of nameplate capacity. I agree that they can not run at current levels (98%) forever, but they could probably average that over a year. I do think there is good reason to believe that refiners may not be able to meet demand going into the winter. However, I did want to point out that running at full capacity is a good thing for the owners of refineries.
Stuart - Your question may have merit as regards oil production. Refineres, on the other hand, are so capital intensive they need to keep running oil through the equipment or lose money. Refiners do make huge profits on inventory when oil prices go up and lose when they drop. However, they typically buy oil something like three months in advance and turn over inventory in that time frame. The cost of storage and idle capital equipment would offset any gain from oil hoarding.
However, since ownership is fairly concentrated, it is not inconceivable that with 98% capacity utilization someone would see that slowing down a few facilities could profit everyone. However, i still think that current margins are justfied based on the economics. Refining margins are up all over the workld and more so in Asia, i believe.