26 September 2004	Sunday	10 Shaban 1425

RIYADH, Sept 25: Galloping global oil consumption, pessimistic projections of Matthew Simmons & Co forecasting imminent depletion of the major Saudi oil fields including Ghawar , the world's largest, Saudi Arabia is entering into a phase of capacity addition to its current output levels.

In response to questions from this correspondent, Saudi Aramco, the oil giant responsible for managing the oil riches of the Kingdom says; It is our strategy to maintain a spare capacity of 1.5-2 million barrels per day (bpd) over and above the actual or the forecasted production. This strategy provides (the Kingdom) with the flexibility to adequately respond to fluctuations and disruptions in the oil market, as it has been doing in the recent past.

Discussing the projects in hand Saudi Aramco said: "We are currently either developing or are in the advance stage of planning additional production capacity from several fields. This is in addition to increased spending to maintain the potential of the current fields. The timing of any field development would depend on near to medium-term oil demand forecast."

The oil company maintained that it had prepared several development schemes, updated on a regular basis to reflect medium to long-term production forecasts. The company once again emphasized it has the reserves and means to develop a higher capacity, if the need arises.

As per reports, Saudi Aramco is already pressing ahead with plans to develop the onshore Abu Hadriyah oil field. This 500,000 b/d field development is expected to be developed at a cost of somewhere between $1,000 and $1,500 million.

Some reports also indicate that Saudi Aramco is also planning to proceed ahead with more large scale oil field development projects, including one at Khurais. This development is expected to be put to tender by next year.

The currently ongoing development of the Abu Safah/Qatif oil field is expected to be completed by the year end. The Qatif oil field, once developed will add 800,000 b/d to the existing capacity.

The major oil field development undertaken in Saudi Arabia was the Shaybah oil field, in the deserts of the Empty Quarters bordering Abu Dhabi in one of the world's largest stretch of inhospitable terrain - that came on stream in 1998. Proven oil reserves in Shaybah stand at about 14.3 million barrels and the production capacity of the field is 500,000 b/d.

These developments appear to be a part of a wider programme and strategy, undertaken by Saudi Aramco, and aimed at raising the Kingdom's oil production capacity well above the existing level of about 10.5 million bpd.

It was perhaps in this perspective that Saudi Aramco President and CEO Abdallah S. Jumah, while addressing the Oxford Energy Seminar, earlier this month reiterated before a global audience, "we continue to say with 100 per cent confidence that we are able to put 10 million barrels, day in day out, for at least the coming 50 years.

We have also worked out scenarios where we are able to increase our production to 11, 12 and even 15 million barrels per day. We know which fields we are going to develop and in what time frames. When there is a call on us (and indeed who can deny that), to produce those amounts, we will be able (to respond to the call) and our reserves base will support it," Jumah stressed.

Even according to the International Energy Outlook 2003, released by the Energy Information Administration (EIA), crude production from the Gulf oil producers is expected to reach 26 million b/d by 2010 and 35 million b/d by 2020. In 2000, the total production of the Gulf Arab producers stood at mere 21.7 million b/d.

In 2003, the Gulf producers were meeting about 27 per cent of the global oil needs. This could go up to 33 per cent by 2020, the EIA projected.

The Gulf has proven oil reserves of 715 billion barrels, representing 57 per cent of the global estimates. The region also boasts of 2,462 tcf of natural gas reserves almost 45 per cent of the global total. Interestingly, virtually the entire spare capacity of crude today is available in this region, mainly Saudi Arabia. As of early September, excess global oil production capacity was estimated at about 0.5 to 1.0 million bpd, all of which was located in Saudi Arabia.

Despite the projections, the oil era is still far from over!