Building a world of
resilient communities.



Oil Windfall Gives Saudi the Capital to Add New Output Capacity

Record oil prices are likely to reduce the chances that companies such as Exxon Mobil Corp. or BP Plc will be asked to develop new crude output capacity in Saudi Arabia as the kingdom doesn't need their capital, Aramco oil company officials and analysts said.

The approximately $16 billion the kingdom will need to invest to add more than 3 million barrels a day of capacity, or 30 percent, can be financed by state-owned Saudi Aramco, said Amin Nasser, the company's chief petroleum engineer.

``It costs us between $2,500 and $5,000 a barrel to develop an existing oil field, and these costs are unlikely to change for the next 10 years,'' Nasser said in an interview in Abu Dhabi. ``Whatever capital is required, if the oil market calls for it, we will put it,'' he said.

Saudi Arabia and the other members of the Organization of Petroleum Exporting Countries are set to enjoy record budget surpluses this year as they pump at near full capacity to help meet soaring global demand that pushed prices to a record $55 a barrel in New York on Friday.

International oil companies weren't immediately available for comment.

``Saudi could have the capital to boost its oil output capacity as long as oil prices remain around $40 a barrel and the government's public finances are managed,'' said Jassem al- Saadoun, the managing director of the Kuwait-based Al Shall economic research institute.

Exxon is one of the largest foreign investors in Saudi Arabia, operating a refinery and petrochemical plants.

$100 Billion Revenue

Saudi Arabia, the world's largest oil producer, will generate annual oil sales of more than $100 billion for the first time this year because of higher international prices and output, Samba bank has projected.

The kingdom's oil revenue will be similar to the 2003 sales of Volkswagen AG, Europe's largest carmaker, which ranked 12th among the world's publicly held companies in terms of annual revenue.

The International Energy Agency, the oil adviser to 26 industrialized countries, and international oil companies such as Total SA have asked Saudi Arabia and other Middle East oil producers to open lands for drilling for the first time in more than two decades to meet an expected surge in energy demand.

``The problem with this idea is that there are no real needs for Aramco to go to the international oil companies for assistance,'' said Khan Zahid, chief economist at Riyad Bank. ``Technically they can do it, and now they have more than enough money.''

Investment Needed

Aramco last month raised its total output capacity by 500,000 barrels a day to 10.5 million barrels a day with the development of the Qatif and Abu Safah oil fields at a cost of close to $3 billion.

Producers in the Middle East, the site of about 65 percent of the world's proven oil reserves, have to spend about $18 billion a year by 2030 to raise output capacity and meet global oil demand, the International Energy Agency has said.

Political issues and financial constraints could impede investments in the Middle East, particularly foreign capital, the Paris-based agency said. Royal Dutch/Shell Group and Total pulled some staff members out of Saudi Arabia earlier this year after suspected al-Qaeda militants stepped up attacks of foreign workers in the country.

``There's no other company in the world that can bring large oil capacity on stream faster or better than Saudi Aramco,'' Abdullah Jumaa, the company's chief executive, said in a statement on the company's Web site last week after a meeting of the board of directors.

$2 a Barrel

Aramco's current production costs are low because there is no need yet for enhanced oil-recovery programs, which usually require more investment. Production costs in Persian Gulf countries such as Oman are rising to about $5 a barrel because of ageing fields.

The cost of pumping an oil barrel in Saudi Arabia is between $1 and $2, compared with a world average of $7.50 a barrel, according to the Aramco Web site. Ali al-Naimi, the kingdom's oil minister, last week identified six oil fields that Aramco could develop within 24 months to add 3.2 million barrels a day of capacity to meet demand.

What do you think? Leave a comment below.

Sign up for regular Resilience bulletins direct to your email.

Take action!  

Find out more about Community Resilience. See our COMMUNITIES page
Start your own projects. See our RESOURCES page.
Help build resilience. DONATE NOW.


This is a community site and the discussion is moderated. The rules in brief: no personal abuse and no climate denial. Complete Guidelines.

Fracking and Health: What we Know from Pennsylvania's Gas Boom

Tensions between economic development, energy policy and environmental and …

Peak Oil Review: A Midweek Update - 24th Aug 2016

 A midweek update. It has been a volatile three days for oil with …

How We Went on an Energy Diet, and What We Lost (and Gained!)

In which I reveal the changes in our household energy usage from 2003 …

Five Billion Years of Energy Supply: the "Stereosphere" and the Upcoming Photovoltaic Revolution

Both the biosphere and the stereosphere use solar light as the energy …

Peak Oil Review - Aug 22 2016

 A weekly roundup of peak oil  news, including: -Oil and the …

Limitless imagination and physical limits

How do we distinguish those ideas that are forever going to remain in the …

Some Reflections on the Twilight of the Oil Age (part III)

The impact of the Tooth Fairy Syndrome is all the more felt in the main …