RIYADH, 12 May 2005 — As the energy fraternity discusses the prospects for the industry in the near and long term, the issue of investments in the sector apparently comes up. Oil industry is a capital intensive industry and riding on the back of lower returns for last many years, there has been a gross underinvestment in the sector in recent past. This underinvestment in the sector is responsible to some extent for the apparent lack of spare capacity — elsewhere than in Saudi Arabia.
In order to override this problem, the International Energy Agency feels that an estimated $16 trillion is needed to be pumped into the industry over the next 25 years. A huge sum indeed!
Saudi Arabia has hence unveiled plans for massive investments in its energy sector. It plans to pump in roughly $50 billion in its energy infrastructure over the next five years, so as to be able to sustain the current and even higher level of production.
The Saudi plans have got a nod of approval from Washington and elsewhere. The US administration has publicly appreciated the investments Saudi Arabia is planning in its energy sector.
In recent days Saudi Arabia has been taken pains to tell the world that it has the capacity and capability to meet the global requirements for many more decades to come.
The worldwide oil reserves by the end of 2002 stood at 1050 billion barrels of which 65 percent (or 686 billion barrels) are proven to be in the Middle East.
Saudi Arabia is definitely the principal player in the market. In order to overcome some of the apprehensions about “maturing” of its fields specially the giant Ghawar, the Saudi Arabian Oil Company (Saudi Aramco) has been quite open about its operations in recent past. It has been churning out data, which even publicly held companies at times try to avoid making public.
Aramco’s current operation encompasses 1.5 million square kilometers, comprising 85 fields, 320 reservoirs and 25 percent of world’s proven reserves. Its current production capacity stands at 10 million barrels of crude and 9.6 billion cubic feet of gas, The company’s strategy calls for an annual reserves replacement of its crude production, while adding 5 trillion cubic feet of gas in reserves.
Saudi Aramco’s oil and gas reserves conform to industry standards. In an exclusive communication to Arab News, Aramco maintained that its current data on proven reserves does take into account reserves attributable to enhanced oil recovery processes, underscoring the conservative nature of its proven reserves.
It’s year end 2003 proven oil reserves totaled 260 billion barrels and incremental probable and possible reserves, in addition to the above, are estimated to be 103 billion barrels. In addition, vast unexplored acreage in the Rub Al Khali desert, along the border with Iraq and the offshore Red Sea basin, are also believed to be offering interesting prospects.
In fact the US Geological Survey 2000 projections point to additional recoverable oil resources ranging from 29 million to 161 million barrels in Saudi Arabia that could be exploited by 2025. Its current OIIP (Oil Initially in Place) is estimated to be 700 billion barrels. By 2025, it could go up to 900 billion barrels.
Unlike some of the pundits arguing that Saudi major fields are past its peak, Aramco maintains, “the overall depletion of Saudi Aramco’s fields is less than 30 percent - significantly lower than the 60 percent level that defines a field as mature. Even for the much talked about, giant Ghawar field, the depletion is at 48 percent.” This is because of a deliberate policy to produce from fields at low rates, relative to their reserves, “typically at annual depletion rates ranging from 1 to 3 percent.”
In the light of the above the company maintains that “sustained daily crude production levels of 10, 12 and 15 million barrels per day, if called upon, can be readily maintained through 2054 and beyond. Saudi Aramco has the financial, organizational and technical capabilities to do so,” the company strongly argues.
