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Oil production capacity expansion plans

Saudi Aramco has said there will be no changes to oil projects due to be implemented by the end of 2009. These will increase Saudi capacity to over 12mbl/d. The Khurais field expansion is due to come on stream by June next year, adding 1.2mbl/d of Arabian light crude. The Khursaniyah field, meanwhile, will add 0.5mbl/d by the end of 2008. But Aramco executives say they do not want to invest in excess spare capacity. As a result, while projects under way will not be discontinued, medium-term projects are likely to be delayed, or even scrapped. Two large projects that could be delayed if prices remain in the present range are the Manifa heavy oilfield project and the offshore Karan gas development. Manifa is, according to the present schedule, due to start production of 0.9mbl/d by 2011 and is part of the Saudi government's programme to achieve and maintain 2mbl/d of excess oil capacity. Karan, an 18.5 bcm per year non-associated gas development, which would supply the domestic market, is due for completion by end-2011. The economics of both projects have been undermined by cost inflation. Originally, the cost of developing Manifa amounted to $9bn, but this has since risen to $15bn. The cost of Karan has more than doubled, from $2bn to $5bn. However, Manifa and Karan may not be delayed for long. According to Sadad al-Husseini, a former head of exploration and production at Aramco, much of the infrastructure at both projects is already in place, making a significant delay "highly unlikely". Other schemes may be affected in a more permanent way. These include the Shaybah expansion in the Empty Quarter. The project is supposed to add 250,000 bbl/d to capacity by 2013, but Aramco chiefs now say the project will be reviewed. Where downstream is concerned, Aramco has admitted that the twin 400,000 b/d export refineries at Jubail and Yanbu could be affected by the tight credit conditions. Costs on the Jubail scheme have risen to more than $10bn, from a projected $6bn in 2007; the cost of Yanbu is reported to have doubled to $13bn, since it was conceived two years ago. In early November, Aramco and its partner, ConocoPhillips, said they would put back the engineering, procurement and construction (EPC) bidding deadline from December to first-quarter 2009. Other Aramco refinery projects are also facing delays: start-up of the $25bn Ras Tanura project has been put back from late October 2008 to first-quarter 2009; while bids for a greenfield refinery at Jizan have been put off by a year, to March 2009. The strategic pbjective is to expand its oil capacity to 12.5m b/d, including the 2m b/d of excess capacity.