Saudi Arabia’s Khurais project
We noted last year that Saudi Arabia was in the process of increasing its oil production substantially. Here’s more on the Khurais project, the Kingdom’s second largest field after the huge Ghawar field, according to the WSJ. The Ghawar field produces 5.2MM bbd and the Khurais project will add 1.2MM bbd in 2009:
Aramco is dipping into one of its last big basins of oil. After Khurais, Saudi Arabia will have only one known mega-field left to fully develop, the even more challenging Manifa field, offshore in the Persian Gulf. Much of the kingdom’s reserves beyond these lie either in aging fields or smaller pockets…The Khurais project is at the heart of an all-out effort by Saudi Arabia to keep abreast of natural declines in older fields while trying to preserve its status as the oil world’s lone safety valve. To do that, Aramco is scrambling to boost its overall production capacity, currently just over 11 million barrels a day, to 12.5 million.
Saudi officials said a few years ago that they could push production to 15 million barrels a day if necessary and sustain that for decades. But for some time they’ve been indicating they would level out at about 12.5 million barrels of capacity. Oil Minister Ali Naimi told a London trade publication called Petroleum Argus over the weekend that Saudi Arabia’s own views on supplies of alternative fuels and global demand show that the world won’t need more Saudi oil through 2020…
the need for water injection raised a slew of complications. The Khurais complex, which includes the smaller satellite fields of Abu Jifan and Mazalij to the south, lies far from most of the kingdom’s oil infrastructure. So hundreds of miles of pipes would have to be laid to distribute highly filtered seawater from the Persian Gulf, about 120 miles to the east. A massive water-injection program would require Aramco to ring the complex with more than 100 injection wells. And Aramco would have to master the field’s complex geology — all 2,700 square miles of it…
Through most of the 1990s, it cost Aramco around $4,000 to add one barrel of daily production capacity. A huge project called Shaybah, finished in 1997, required Aramco to run roads and pipelines deep into the country’s forbidding Empty Quarter and cost around $2 billion. For that, Aramco got 500,000 barrels a day in oil-production capacity. Some experts estimate that it now costs the company closer to $16,000 to add one additional barrel of daily production capacity.
That $16,000 investment generates over $100 a day in oil production (actually $118 today) at current prices, or as much as $43,000. In other words, the capital costs per barrel represent only a few months of revenue at current prices. That’s a very fast payback on a capital project of this sort, though it does not include the operating costs of running the Khurais complex.