Daily Management Review

Saudi Aramco to Increase Production Despite Low Prices


Saudi Arabia’s state oil company will accelerate the development of large deposits of oil ‘Hurais’ and will increase natural gas production by 2 times in the next 10 years. This was stated by Amin Nasser, CEO of Saudi Aramco.

Eric Kounce
Eric Kounce
The company does not intend to cancel any project in the field of oil, gas or hydrocarbon processing. Aramco plans to significantly increase the capacity of "Ras Tanura" refinery, which is already the largest processing plant in Saudi Arabia and produces 550 th. barrels of oil per day.

Those experts, who claimed that the Saudis will reduce oil production because of the drop in prices, should forget about their hopes. What is interesting: in 2014, Riyadh forced OPEC to maintain production quotas, which is why oil prices have fallen by 50% over time. At the beginning of 2016, the Saudis on a par with Russia took the initiative to freeze production that has caused prices to rise.

It is worth noting that Saudi Aramco is a perfect example of an absolute monopoly: the company owns all the oil fields of the kingdom. It is not clear exactly how Saudi Aramco’s plans to significantly increase production and Saudi Arabia’s intentions to leave it to the January levels will get along.

The next phase of production capacity at Hurais field will be completed by 2018, said Amin Nasser. Production here should be increased by 300 th. barrels per day to 1.5 million. This goal was set in 2013 by the previous CEO Khalid Al Falih, and noone is not going to give it up, despite the partial change of Riyadh’s rhetoric. 

Perhaps, another, the largest in the country ‘Ghawar’ field will ensure the freezing agreement? It provides 60% of crude oil in Saudi Arabia, and extraction here has been carried out for more than 70 years. Maybe the levels will fall naturally as a result of exhaustion? No, says the new head of Saudi Aramco. Exploration revealed no signs of exhaustion, stable mining may continue for many years.

Aramco has also found a new large gas reserves within Jafura deposit. The company also maintains an intensive exploration of oil and gas on the Red Sea. In general, lack of Saudi hydrocarbons on the world market is not expected in the near future.

Experts say that despite the loud statements about the freezing, and even hints at cut production quotas, the main Riyadh’s purpose remains the preservation of market share. Especially it’s true for Asia, which in this terms has overtaken America.  For the second consecutive year, it remains a key center for oil consumption (according to the IEA).

It’s worth noting that the Saudis have been successful. South Korea's crude oil imports from the Middle East increased to a maximum of 1980 Indian refineries began to order more oil. And China, the largest consumer in the region, reduced purchases in Venezuela and Colombia, and boosted in Saudi Arabia and Oman.

source: bloomberg.com

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