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 completion of Saudi Aramco's programme. It already had the potential to produce up to 10m b/d in late 1994.

The total costs of upgrade and expansions 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 $34-50 bn. But actual costs 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 re-completion of 108 more.

E&P costs were $2-4 bn/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, 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.

Southern Area - Ralph Parsons: This five-year job for Hawiyah, a Ghawar field, called for a new 300,000 b/d GOSP and for expansion of two GOSPs, plus a new 1.35m b/d seawater injection plant and an extension to the seawater treatment plant at Qurrayah. By July 1992 completion of the water injection pipeline raised Ghawar's capacity, with a 150,000 b/d GOSP added at Farzan.

In February 1992 Bechtel/CCC got the job to build a 300,000 b/d GOSP and expand by 300,000 b/d to 1.2m b/d two others at Hawiyah. Now Hawiyah is the site of a huge plant processing non-associated gas. Haradh, a Ghawar oil and gas field, is the site of a plant processing 1,620 MCF/d of non-associated gas since in late 2003. Two contracts were given later in 1992 to update the control systems for the crude oil processing system at Abqaiq field near the north of Ghawar and the gas plant at Ghawar's Uthmaniyah. Adding the Farzan GOSP to the 300,000 b/d GOSP for Udayliyah meant another 520,000 b/d in new Ghawar capacity. But there was little doubt the Ghawar fields were maturing and required new drilling and injection technologies.

The Najd Fields - John Brown: The contract to develop the Hawtah trend in the Najd called for one GOSP and one blending station, with construction of a pipeline to link the new production system to Petroline (the east-west crude oil pipeline). This project was expanded and speeded up as more fields were found in the area by mid-1993. Capacity was targeted in 1994 to reach 200,000 b/d in early 1995, which was realised. Saudi Aramco began giving contracts for the Hawtah development with the April 1992 award to ABB Lummus Crest (a US unit of the Swedish-Swiss firm Asea Brown Boveri) of a job to build a GOSP in Hawtah. Another contract was given in mid-1992 to Stone and Webster for a crude oil stabilisation plant at the field.

To Maintain Potential - Lummus Crest: This contract focused on ongoing infrastructural support for Marjan, Berri and Safaniyah. It predated the expansion and was to meet the needs of various fields.

Lummus Crest has built in kit form modular platforms for the offshore expansion in the northern area. Lummus Crest also dealt with ongoing problems of corrosion in the underwater pipelines.

The Gulf Crisis: Iraq's invasion of Kuwait on Aug. 2, 1990 meant 5m b/d of Iraqi and Kuwaiti oil output was out of the market. It prompted Riyadh to raise output at top speed. Prompted by Washington, US firms provided Saudi Aramco with technical help and equipment at a speed matching the US military build-up in the Eastern Province. This enabled Saudi Aramco to raise crude oil production to over 8m b/d in October 1990, by which time world oil prices had risen sharply.

Much of the increase in production capacity was accomplished from late 1990 through a de-mothballing of existing facilities: the recommissioning of 146 oil wells and 12 mothballed GOSPs in the Ghawar, Harmaliyah and Khurais fields, together with all associated gas gathering and wet crude oil handling facilities. These added more than 1m b/d of Arab Extra Light, Arab Light and Arab Medium crudes to meet world demand. Other efforts to raise output during the Gulf crisis included opening up GOSPs in the Safaniyah, Zuluf, Marjan, Khursaniyah, Qatif and Abu Hadriyah fields, which had previously been bypassed. Work also involved the drilling of 82 new oil wells and a new 72 km pipeline to connect 42 wells to GOSPs in these fields.

When the Gulf war broke out in January 1991, Saudi output averaged 8.7m b/d and world oil prices were falling. Capacity additions enabled Saudi Aramco to produce 9.1m b/d in August 1991, with another 185,000 b/d coming from the Saudi share of the Divided Zone. This helped restore market stability after an aborted coup in the Soviet Union and a September OPEC meeting. Later the Saudi output fell to 8m b/d in line with an OPEC quota. But the share of lighter crudes in Saudi exports at times reached almost 7m b/d.

The Oil & Gas Fields: Crude oil production in Saudi Arabia began in May 1939 when the first field, Dammam, went on stream. Saudi Aramco has made impressive discoveries since it was set up in the 1980s. In 1998 alone, it found 3.1 bn barrels of oil, allowing it to replace what it produced during that year. In 2006, Saudi Aramco found 3.6 bn barrels of crude oil, 6% more than it produced. It added 10.4 TCF of natural gas, more than expected.

There are over 80 oil and gas fields in Saudi Arabia, mostly undeveloped. Many of them are onshore with Jurassic reservoirs. Of the developed fields, 12 provide the bulk of Saudi Aramco's oil and gas production and contain most of its petroleum reserves.

There are less than 1,500 wells producing oil and gas. This is the lowest number in the world relative to the size of the Saudi output, the largest in the world, compared to more than 1,600 wells in Algeria which accounts for less than 18% of the Saudi capacity.