MANAMA May 25 Saudi Arabia's Khursaniyah
oilfield expansion project is not yet pumping, but large parts
of its 500,000 barrels per day capacity are ready, an official
at state oil giant Saudi Aramco said on Sunday.
The world's top oil exporter had planned to bring
Khursaniyah online in December. The expansion is the largest
single boost to global oil capacity for several years.
But delays in construction of a plant to process gas
produced at the oilfield have prevented the start up, Khalid
al-Falih, Aramco's executive vice president of operations, told
"The gas plant is a major delay. It's really a
disappointment," Falih said. "All of it will be ready in a few
Aramco could bring on most of Khursaniyah's capacity if
needed, Falih said. But gas would have to be burnt off, which
Aramco wanted to avoid, he added.
The field produces light crude, and Falih said Aramco had
seen little increased demand for that type of oil from its
customers. Most recent demand growth was for medium and heavy
grades, he added.
Saudi Arabia boosted crude output of 300,000 bpd earlier
this month and is targeting total output of 9.45 million bpd in
June. That increment came from several fields including Ghawar
and Safaniyah, Falih said.
The Khurais oilfield project to expand output by 1.2
million bpd would be completed in June and output would start
in July next year, he said. Drilling there was ahead of
schedule, he added.
Saudi Arabia is on track to boost output capacity to 12.5
million bpd by the end of 2009, but sees no need to go any
further for now, Falih reiterated.
The kingdom will have spare oil capacity of more than 2
million bpd next year, he said. Saudi Arabia is the holder of
most of the world's spare crude capacity and has a long-held
policy of keeping that cushion at 1.5 million bpd to 2.0
million bpd to meet any surprise disruption in global
"The way we look at the market now, next year we are going
to have well in excess of 2 million barrels of spare capacity,"
Falih said. "So unless we see a major pick up in demand in the
years to come, we don't see a need to think other than to
When demand eats into the supply cushion, Saudi will boost
capacity again as it did when Chinese demand surged in 2004,
There was uncertainty about how both supply and demand will
react to record pries, he added. U.S. crude CLc1 hit a record
above $135 a barrel last week and high prices have cut demand
in industrialised countries.
Shaybah, Safaniyah, Berri, and Khurais oilfields could all
provide more capacity, he added.
"We have a number of increments that we have prepared but
we will not disclose them, we will not execute them unless we
see the market," he said.
Concern that long-term oil supply will struggle to keep up
with demand has added momentum to the price rise. Saudi
reluctance to announce any more expansion plans has played into
fears that global oil output may be at or near its peak.
"They (peak oil theorists) can say what they want to say,"
said Falih. "But nobody else is putting money in at these costs
to have 2 million barrels of spare capacity. We don't talk. We
let our actions do the talking for us. If demand for our oil
eats up into our 1.5-2.0 million bpd capacity, we will again
answer with our actions."
(Editing by Leslie Gevirtz)