SAUDI ARABIA - Expansion Background.

In the 1970s, the then US-controlled Aramco was to expand its oil production capacity to 20m b/d by the late 1990s. Several factors combined to limit its capacity from more than 11m b/d in the early 1980s to 7.5m b/d in late 1989. After it was taken over by the state, becoming Saudi Aramco in 1988, the idea was to have a sustainable capacity of 10m b/d by 2000. But the actual projects were not to be planned before the 1990 programme.

In September 1990, one month after Iraq invaded Kuwait and oil exports from these two countries were suspended, Saudi Aramco advanced its target date to end-1995. The objective, 10m b/d, was reached in June 1995 with the completion of Saudi Aramco's programme. The company already had the potential to produce up to 10m b/d in late 1994.

he total costs of upgrade and expansion programmes for Saudi Aramco, the Petromin/Samarec refineries (later absorbed by Saudi Aramco), SABIC and base and lube oil projects were in late 1991 estimated at about $34-50 bn. But actual costs came to much less than that. Some projects were scaled down, and others were cancelled in response to falling oil prices.

Saudi Aramco's programme offered big opportunities to firms operating in energy services and construction sectors, with US firms being the main winners. The focus was on bringing back shut-in facilities, construction of additional GOSPs, and massive water-injection facilities to maintain reservoir pressures. New water treatment facilities included tankage, filtration, chemical treatment, pumps, piping, metering and controls. The plan called for the drilling of 226 development wells and recompletion of 108 more.

Capital costs for E&P were $2-4 bn per year in 1992-1994. It was estimated that spending for E&P, maintenance and support would range from $2.6 bn to $4.3 bn per annum in 1992-1995. The main Saudi Aramco upstream contracts had been awarded by late 1991. Their cost was estimated at $3.5 bn. The following were the main projects:

Northern Area - Fluor Daniel: This five-year project upgraded the offshore Safaniyah, Marjan and Berri fields and the onshore Zuluf field. It involved addition of two GOSPs to the facilities, improvement of a gas compression plant and a central utilities unit at Marjan (developed in the early 1980s but mothballed before it began production).

Fluor Daniel as EPC contractor added gas compression facilities and a utilities plant in Safaniyah. It installed wet crude handling facilities at Zuluf. In 1993, Saudi Aramco decided to partly mothball some fields producing heavy crudes. The move led to a major cut in the export of heavy and medium grades, affecting many of Saudi Aramco's clients.