SAUDI ARABIA - Expansion Costs Rising.

Tougher-than-expected technical hurdles and an accelerated schedule are quickly raising costs for Saudi Aramco's expansions. Total upstream costs have risen from a $12-15 bn budget in late 2004 to $23 bn. Obaid on June 1 said getting oil out of the fields mentioned above had proven more challenging and required costlier drilling technology then expected. A speeded up roll-out had also raised costs, he said.

Bigger spending poses a challenge to the Saudi state which relies on oil for most of its revenue. Rising oil prices have funded two years of budget surplus ending years of deficits, but the government is spending much more now due to a dearth of EPC contractors and continuing rise in contract costs - on top of higher social welfare spending to fight off mounting unemployment stemming from a population explosion.