Saudi tackling need for production capacity, gas

Saudi is producing more gas and identifying new sources of oil

Ali Naimi: "We are far more concerned about crude burn. Not because we want to export it, but because it is a shame to burn it." GETTY IMAGES
Ali Naimi: "We are far more concerned about crude burn. Not because we want to export it, but because it is a shame to burn it." GETTY IMAGES

Two recent reports suggest Saudi is beginning to rise to two pressing and related challenges: convincing the world of its credentials as world’s swing producer of oil, and controlling the use of oil to generate power.

The non-associated Karan gas field is increasing its yields, and flows of associated gas from oil fields have increased as the Kingdom has hiked oil flows to storage in a bid to calm restive oil markets. The two measures are reckoned by officials to save at least 100,000 barrels of oil per day (bpd) that would otherwise be burned to generate electricity, according to a Reuters report.

Saudi Oil Minister Al Naimi told Reuters in Doha that around 500 million cubic feet a day (mcfd) more gas, or around 90,000 barrels of oil equivalent (boed), would be made available for the hottest months of the year, when air conditioning demand puts huge pressure on the Saudi grid.

’We are far more concerned about crude burn. Not because we want to export it, but because it is a shame to burn it," Naimi said. Saudi sells crude domestically for around $10 a barrel.

Saudi’s domestic oil use is slated to rise from 2.4 million bpd in 2010 to 6.5 million bpd in 2030, according to research by Jadwa, a Saudi finance house. Avoiding this will require massive investments in other sources of energy for electricity generation.

Meanwhile, Reuters has separately reported that the Kingdom will use a record number of drilling rigs this year as it ramps up production in the face of possible supply shortages due to Western sanctions on Iran.

Saudi is expected to have a record 140 oil and gas rigs in country by the end of the year. Most are being used for oil drilling but others are probing for gas, being used for maintenance or drilling for water needed to reinject into oilfields to boost production.

Last year, industry sources said that Aramco planned to raise the number of drilling rigs it operates to pre financial crisis levels of up to 135 by the Q2 of 2012. Many of the additional rigs will be allocated to Manifa, as Aramco expedited plans to bring the 900,000 barrel per day oil field on line in Phases II from 2013.

Aramco is also de-mothballing the historic Dammam field, which Aramco CEO Khalid Al-Falih says could yield 40,000 bpd.

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