The ramp up of intensity in drilling activity, both onshore and offshore Saudi Arabia, has been dramatic in the last decade. The existing oilfields have been maturing and Saudi Aramco has been investing heavily in new wells and new production infrastructure both for existing fields and to bring new fields onstream. Production has held up well and is currently 9.7 million bpd vs 9.3 million bpd at the end of 2004. The rig fleet in the country, over the same period of time, has increased from 49 in 2004 to 170 rigs as of the end of 2013.
With highly subsidised domestic oil consumption doubling over the past 15 years and set for further strong growth, Saudi is seeking to reduce the domestic dependence of its power generation infrastructure on oil, in order to maximise the volumes available for export. Saudi Aramco has plans to increase gas output from the Red Sea, the Persian Gulf and also from onshore shale-gas resources. This will drive a further increase in the rig fleet.
So how is it doing? Not so well. The latest government data suggests that Saudi Arabia was domestically burning a staggering 680,000 bpd of oil in May 2014 compared to 547,000 bpd a year earlier. Oil exports (which had been holding pretty steady – the December 2004 volumes was 7.5 million bpd) have fallen from 7.8 million bpd in May 2013 to just under 7 million bpd as of May 2014.
Additional volumes of natural gas can’t come soon enough for Saudi Arabia.
Steve Robertson, Douglas-Westwood Houston
+1 713 714 4882 or Steve.Robertson@douglaswestwood.com