Exploration And Production In Saudi Arabia

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Crude Oil

Reserves

• According to the Oil and Gas Journal, Saudi Arabia contains approximately 265 billion barrels of proven oil reserves (plus 2.5 billion barrels in the Saudi-Kuwaiti shared Neutral Zone) as of January 1, 2013, amounting to slightly less than one-fifth of proven, conventional world oil reserves.
• Although Saudi Arabia has about 100 major oil and gas fields, over half of its oil reserves are contained in only eight fields. The giant Ghawar field, the world's largest oil field with estimated remaining reserves of 70 billion barrels, has more proven oil reserves than all but seven other countries.

Production

• Saudi Arabia produced on average 11.6 million bbl/d of total petroleum liquids in 2012. In addition to 9.8 million bbl/d of crude oil, Saudi Arabia produced 1.8 million bbl/d of natural gas liquids (NGL) and other liquids. Saudi Arabia, a leading world producer of NGL, has experienced a rise in demand for NGL from developing countries, including India (the leading export destination), where it is used for cooking and transportation.
• Saudi Arabia maintains the world's largest crude oil production capacity, estimated at a little less than 12 million bbl/d at the end of 2012 (other petroleum liquids, which are not subject to OPEC quotas or production targets, are produced at full capacity). Saudi Arabia's long-term goal is to further develop its lighter crude oil potential. Although the Ministry has not committed to increasing capacity, potential increases to 15 million bbl/d capacity were discussed at a summit in Jeddah in June 2008.

Saudi crude streams

• Saudi Arabia produces a range of crude oils, from heavy to super light. Of Saudi Arabia's total crude oil production capacity, about 65 to 70 percent is considered light gravity, with about 25 percent considered medium gravity, and the rest heavy. The country is moving to reduce the share of the latter two grades.
• Lighter grades generally are produced onshore, while medium and heavy grades come mainly from offshore fields. Most Saudi oil production, except for extra light and super light, is considered sour, containing relatively high levels of sulfur. Saudi Aramco said that its fields do not require the use of enhanced oil recovery techniques, although fields in the Neutral Zone could require steam flooding.
• Decline estimates for Saudi Arabian oil fields vary widely. One industry source (Platts Oilgram, 2006) estimated that the declines rates for existing fields could range from 6 to 8 percent annually, meaning that the country needs about 700,000 bbl/d in additional capacity each year just to compensate for natural decline.
• The Ministry of Petroleum and Mineral Resources maintains that decline rates in Saudi Arabia are closer to 2 to 3 percent per year. Saudi Aramco has stated that it will conduct additional drilling at existing fields in order to help compensate for the natural declines from the mature fields, and the kingdom is budgeting $20-$30 billion over the next 5 years to offset decline rates and maintain current capacity levels.

Major Oil and Gas Fields in Saudi Arabia

Location Production/Capacity

1. Ghawar Oil Field
   • Önshore - 5 million bbl/d of Arab Light crude
2. Safaniya Oil Field
   • Offshore - 1.5 million bbl/d of Arab Heavy crude
3. Khurais Oil Field
   • Onshore - 1.2 million bbl/d of Arab Light crude
4. Manifa Oil and Gas Field
   • Offshore - 0.9 million bbl/d of Arab Heavy crude oil after completion.
   • Projected to come online in December 2014
5. Shaybah Oil Field
   • Onshore 0.75 million bbl/d of Arab Extra Light
6. Qatif Oil Field
   • Onshore Capacity - 500,000 bbl/d of Arab Light crude
7. Khursaniyah Oil and Gas Field
   • Onshore - 500,000 bbl/d Arab Light Crude
8. Zuluf Oil Field
   • Offshore - 450,000 bbl/d of Arab Medium crude
9. Abqaiq Oil Field
   • Onshore - 400,000 bbl/d Arab Extra Light crude

Saudi-Kuwait Neutral Zone

• The Saudi-Kuwait Neutral Zone (or the Divided Zone), is an area of 2,230 square miles between the borders of Saudi Arabia and Kuwait. The Neutral Zone contains an estimated 5 billion barrels of proven oil reserves that are shared equally between the two countries. Crude oil production has been approximately 600,000 bbl/d, although production declined slightly during the latter half of 2012.
• Within the Neutral Zone, Japan's Arabian Oil Co. (AOC) traditionally operated the two offshore fields of Khafji and Hout with 300,000 bbl/d in production, but in February 2000, AOC lost the concession, and Aramco took over operation of the former AOC fields. ChevronTexaco operates three onshore fields (Wafra, Humma, and South Umm Gudair) in the Neutral Zone under a 60-year license that was renewed in July 2008. These fields had 2 billion barrels of proven reserves as of the end of 2012 and produce about 260,000 bbl/d of Arab Heavy oil. Finally, Bahrain and Saudi Arabia share the 300,000 bbl/d production of the Abu Safah Oil Field.

Processing

• Saudi Aramco operates the world's largest oil processing facility and crude stabilization plant in the world at Abqaiq, in eastern Saudi Arabia, with a crude processing capacity of more than 7 million bbl/d. The plant processes the majority of Arab Extra Light and Arab Light crude oils, as well as NGL.
• The facility's infrastructure includes pumping stations, gas-oil separation plants (GOSPs), hydro-desulphurization units, and an extensive network of pipelines that connects the plant to the ports of Ras al-Juaymah, Ras Tanura, and Yanbu (for NGL). Nearly two-thirds of Saudi crude is processed at Abqaiq before export or delivery to refineries.

Natural Gas

Reserves

• Saudi Arabia (including the Neutral Zone) had proven natural gas reserves of 288 trillion cubic feet (Tcf) at the end of 2012, fifth largest in the world behind Russia, Iran, Qatar, and the United States, according to EIA estimates. About 5 Tcf was added in 2012, and over the last decade, Saudi Arabia added over 60 Tcf of natural gas reserves.
• The majority of gas fields in Saudi Arabia are associated with petroleum deposits, or found in the same wells as the crude oil, and production increases of this type of gas remain linked to an increase in oil production.
• About 57 percent of Saudi Arabia's proven natural gas reserves consists of associated gas at the giant onshore Ghawar field and the offshore Safaniya and Zuluf fields. The Ghawar oil field alone accounts for approximately one-third of the country's proven natural gas reserves. According to Saudi Aramco, only 15 percent of Saudi Arabia has been "adequately explored for gas."

Production and consumption

• Saudi Arabia does not import or export natural gas, so all consumption must be met by domestic production. According to Saudi Aramco forecasts, natural gas demand in the Kingdom is expected to almost double by 2030 from 2011 levels of 3.5 trillion cubic feet (Tcf) per year.
• Rapid reserve development is necessary for Saudi Arabia's plans to fuel the growth of the petrochemical secto, as well as for power generation and for water desalination. All current and future gas supplies (except natural gas liquids) reportedly remain earmarked for domestic use, in part to minimize the use of crude oil for power generation.
• However, natural gas production remains limited, as soaring costs of production, exploration, processing, and distribution of gas have squeezed supply. OPEC estimates that 13 to 14 percent of total production is lost to venting, flaring, reinjection and natural processes.

Upstream developments and strategy

• Although most of its natural gas reserves are from associated gas, Saudi Arabia is not likely to boost its gas production from associated gas reserves in the near future because it has completed its recent major oil development phase, and shifted its attention to natural gas and downstream petroleum activities. To meet growing domestic needs for additional production, the Petroleum Ministry and Saudi Aramco announced a $9-billion strategy to add 50 Tcf of non-associated reserves by 2016 through new discoveries (and potentially another 50 Tcf of associated reserves).
• Saudi Aramco has focused heavily on major offshore gas developments in the Persian Gulf. Exploration and development will also commence in non-producing areas such as the Red Sea, northern and western Saudi Arabia, and the Nafud basin, north of Riyadh. In order to access Saudi Arabia's uconventional gas resources, Saudi Aramco also launched its Upstream Unconventional Gas program in 2011.

Upstream developments by Saudi Aramco

• Saudi Aramco has focused on offshore fields in the Persian Gulf in its current 5-year plan to expand its natural gas production. Three non-associated gas fields have been targeted:
• The Karan Gas Field, discovered in 2006, is Saudi Arabia's first offshore non-associated gas development. The Karan field came online in 2011 and is expected to produce 1.8 billion cubic feet per day (Bcf/d) of sour gas that will be delivered via a 110-kilometer subsea pipeline to the Khursaniyah Gas Processing Plant.
• The 1.2 Bcf/d Arabiyah gas field is expected online within 5 years.
• The 1.3 Bcf/d Hasbah gas field is expected online within 5 years.
• The Arabiyah and Hasbah fields are believed to contain high-sulfur natural gas that will be processed at the Khursaniyah gas plant. The high sulfur levels of these gases, as well as the offshore location, will make them relatively expensive to develop.
• In response to these new upstream developments, a major expansion of natural gas and natural gas liquids processing capacity from 9.3 Bcf/d to 12.5 Bcf/d is underway at Khursaniyah, Hawiyah, Ju'aymah, Yanbu, and Khurais to process increases in production.
• Saudi Arabia is also building a 2.5 Bcf/d Wasit Gas Processing Plant, which will be one of the largest gas plants Saudi Aramco has ever built. It has a target completion date set at mid-2014. This plant will receive gas from the Arabiyah and Hasbah fields.

Upstream activities in contested regions

• Plans to develop the offshore Dorra field (located in the uncontested Saudi-Kuwait Neutral Zone) jointly with Kuwait have met with opposition because a small portion of that field is also claimed by Iran, who refers to it as the Arash field. In addition, some of the maritime borders with Kuwait and Iran remain un-demarcated. Saudi Arabia reached an agreement with Kuwait in July 2000 to share Dorra output equally. According to Saudi Aramco, the field is estimated to contain non-associated natural gas reserves of between 35 and 60 Tcf, and the field is under seismic study. The Kuwaiti Ministry of Oil has reported that the goal is to initially produce 600 million cubic feet per day (MMcf/d) from Dorra.

Upstream activities in the empty quarter (Rub al-Khali)

• The Saudi domestic natural gas market, traditionally the sole domain of Saudi Aramco, is slowly being opened to private investment both in exploration and distribution, and increasing competition in the market. The backbone of the non-associated gas exploration strategy relies on foreign consortiums exploring for onshore gas and condensate (natural gas liquids) in the Rub al-Khali, which encompasses most of the southern third of Saudi Arabia.
• Saudi Arabia has four upstream joint ventures in the Empty Quarter:
  • South Rub al-Khali Company or SRAK (a venture of Saudi Aramco and Royal Dutch Shell)
  • Luksar Energy Limited (a venture of Saudi Aramco and Lukoil)
  • Sino Saudi Gas Limited (a venture of Saudi Aramco and Sinopec)
  • EniRepSa Gas Limited (a consortium of Saudi Aramco, Eni, and Repsol-YPF)
• To date, these ventures have not made significant commercial discoveries, in part because development costs would be far higher than Saudi Arabia's official domestic gas price. SRAK received approval for an appraisal program for the Kidan sour gas field, which holds about 7 Tcf of high sulfur gas.

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