Saudi Adds Significant New Production
Saudi Arabia announced on Thursday that they will start adding 500,000 bpd to its total capacity when the Khursaniyah field comes on stream this month. Abdulaziz al-Judaimi, vice president of new business development at Saudi Aramco said, "The Khursaniyah field will start producing within a month at 300,000 bpd and will eventually add 500,000 bpd to the country's production capacity."
This may be true or it may be just propaganda in an effort to talk down oil prices. The Khursaniyah field has been said to be coming online for nearly two years now and it never starts. Delays of this magnitude are common but some feel there were serious shortfalls in the capacity being developed and many more wells had to be drilled to produce anything close to what was promised. We may never know exactly how much oil will be produced from this field because the Saudi's rarely give any accurate production numbers.
Saudi is scheduled to add another 250,000 bpd by year end when it completes the 500,000 bpd Shaybah oil field expansion in the desert known as the Rub al Khali or Empty Quarter. December is the target date for that completion.
Saudi is pouring $90 billion of its oil sales back into new development and refining capacity over a 5-year period in an effort to boost capacity to 12 million barrels per day by 2010. Work is continuing on the 900,000 bpd Manifa field and the 1.2 mbpd Khurais project.
Not a glut, still a shortage
All of this oil coming online over the next 24 months sounds like a glut of supply. Investors need to remember that with global depletion currently around 6% per year on 88 mbpd this requires 5.2 million barrels of new production to come online each year just to stay even. By 2010 this would require an additional 13.76 million barrels of new daily production to overcome the 6% annual depletion and the 1.4 mbpd of new demand for 2008 and 1.8 mbpd of new demand projected for 2009. Currently there are only about 6 mbpd scheduled to begin production over the next 24 months.Jim Brown