Saudi Aramco is pressing on with plans to ramp up its crude production capacity, looking to fill what it says will be a looming supply hole left by other global oil companies, which are cutting back on their upstream plans.
The Saudi state-run oil giant said Aug. 9 that it’s on pace to raise how much crude oil it can produce from its current 12 million b/d to about 12.55 million b/d by 2025, on its way to achieving a maximum sustainable capacity of 13 million b/d in the coming decade.
Engineering work to expand output at the Marjan and Berri fields is in the final stages, Aramco said in its second quarter earnings report. The Marjan and Berri projects are expected to add production capacity of 300,000 b/d and 250,000 b/d, respectively, by 2025, the company said.
Aramco also in the second quarter completed the Ain Dar and Farzan crude oil increment targeting secondary reservoirs that will add a total production capacity of 175,000 b/d.
“We see a lot of drop in investments when it comes to crude oil supply in the mid- and long-term. We are capitalizing on the opportunity by first increasing our maximum sustainable capacity from 12 million b/d to 13 million b/d,” CEO Amin Nasser said on a web call with analysts on Aug. 9.
“Of course we are trying to benefit out of the lack of investments by major players in the market by putting investments in this sector.”
Aramco is boosting its oil production capacity at a time when most oil majors are curbing their investments and future development in new increments as part of their energy transition policies. Aramco’s capital expenditure in 2021 is expected to reach $35 billion, up from $26.9 billion in 2020.
Aramco is starting work on expanding its maximum sustainable capacity now because it will be needed in the long-term and it takes time to bring extra supply onstream, Nasser said. Aramco also needs the extra capacity to feed into future oil to chemicals and other projects the company may develop.
“When there is a need for additional capacity it is not going to come easy,” Nasser said. “Any increment takes five to seven years, some increments take eight to nine years.”
Aramco has the ability to expand its maximum sustainable capacity to more than 13 million b/d thanks to its 260 billion barrels in oil reserves, if the Saudi government requests this ramp-up, he said.
The reserve base “gives us advantage to go even beyond that (13 million b/d) if the market or the demand is there and if we get a request from the government with regards to expanding the maximum sustainable capacity,” Nasser said on the analysts’ call.
The world’s biggest energy company is in the Front End Engineering and Design or FEED stage to boost its maximum sustainable capacity to 13 million b/d, Nasser said. The FEED stage is expected to last around two years and the increments will mainly come from offshore fields.
The company’s profit surged fourfold on the year in Q2 to Saudi Riyals 95.5 billion ($25.5 billion) due to higher oil prices and improved global demand. However, its oil production fell 7.5% to an average of 8.6 million b/d and total hydrocarbon output shrank 8% to 11.7 million boe/d due to the OPEC+ cuts implemented this year.
The net profit uptick was partially offset by lower crude oil volumes sold and higher crude oil production royalties.
Aramco wants to invest in renewables as part of its clean energy pivot.
“The company remains committed to the global energy transition and views renewable energy as a complement to its own energy products, supported by vast solar and wind resources in-kingdom,” it said. “The company is currently evaluating potential projects with partners to make investments in renewables.”
It is partnering with the country’s sovereign wealth fund, the Public Investment Fund, and Saudi-based ACWA Power on renewables, Nasser said on the analysts’ call.
The company is also keen to be a low-carbon intensity producer and has verified by an independent third party its scope 1 and scope 2 upstream greenhouse gas emissions for 2020, which had a carbon intensity of 10.6 kg CO2e/boe.
Upstream capital expenditures for Q2 increased by 5.6% to $5.4 billion as the company carried on with ongoing crude oil increments and other development drilling programs. Downstream capital expenditures for Q2 surged by 79.7% to $1.97 billion, primarily due to the consolidation of Saudi Basic Industries Corp.’s capital expenditures and various project upgrades including the Master Gas System. Aramco last year acquired 70% of chemical maker SABIC