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Saudi Arabia holds oil production capacity

7/2/2024

Engineer onboard offshore oil platform Photo: Saudi Aramco
Saudi Arabia has shelved plans to boost oil output capacity to 13mn b/d

Photo: Saudi Aramco

Saudi Arabia’s Ministry of Energy recently ordered Saudi Aramco to maintain its maximum sustainable oil production capacity at 12mn b/d and to halt the planned expansion to 13mn b/d that was announced in 2020.

The announcement surprised the market, as the state-owned company, the biggest oil producer in the world, reported just last November that its multi-billion dollar programme to increase capacity to 13mn b/d by 2027 in response to rising demand from China and India was progressing well.  

 

The reversal of plans to boost oil output capacity raises questions about Saudi Arabia’s views on future global oil demand, with some market analysts suggesting it is a clear sign that the country is moderating its expectations. However, a Saudi spokesperson was cited in Reuters as saying that the lowered target did not reflect a change in the Saudi view of future oil demand, nor did it stem from any technical issue.

 

Saudi Arabia currently produces some 9mn b/d of oil, having curbed output in mid-2023 as part of OPEC+ efforts to shore up oil prices and prevent a surplus. The 3mn b/d spare capacity means Saudi Aramco could easily increase output if the market required it.

 

Although oil remains central to Saudi Arabia’s economy, the country is expanding its natural gas and renewables operations, as well as the chemicals sector.  

 

For example, in November last year Saudi Aramco produced first unconventional tight gas from the South Ghawar field, which is expected to deliver 750mn cf/d of raw gas in the near future, while work continues towards bringing onstream the giant Jafurah unconventional gas field. Reported to be the largest liquid-rich shale gas play in the Middle East, Jafurah is expected to help double Saudi Arabia’s gas output by 2030 and make the kingdom a gas exporter for the first time.

 

Meanwhile, Saudi Arabia is aiming for 50% of total power generation from renewables by 2030 and has more than a dozen renewable projects underway. These include NEOM in the north-east of the kingdom, which features plans for the world’s largest hydrogen facility that will utilise both wind and solar energy.

 

Production increase planned for Qatar’s largest oil field

In other Middle East oil news, QatarEnergy has awarded $6bn worth of engineering, procurement, construction and installation (EPCI) contracts for the next development phase of the offshore Al-Shaheen field. The company plans to increase production from what is Qatar’s largest oil field by about 100,000 b/d. Al-Shaheen currently produces around half of Qatar’s crude oil.

 

The award is part of Project Ru’ya (‘vision’ in Arabic), which is the third phase of Al-Shaheen’s development since North Oil Company, a joint venture between QatarEnergy (70%) and TotalEnergies (30%), took over the field’s operation in July 2017.

 

Project Ru’ya, which will develop more than 550mn barrels of oil, will be executed over a period of five years with first oil expected in 2027. The project includes the drilling of more than 200 wells and the installation of a new centralised process complex, nine remote wellhead platforms and associated pipelines.