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Page added on August 25, 2014

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Saudi Aramco Plans To Invest $40B A Year For The Next Decade

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Saudi Aramco Plans To Invest $40B A Year For The Next Decade
Saudi Aramco plans to invest $40 billion a year over the next decade to keep oil production capacity steady and double gas production, CEO Khalid Al-Falih says.

Argentina and Mexico’s governments are setting a trend in Latin America that should extend through 2020 toward maximizing rather than nationalizing oil and gas resources, making the region more hospitable to investment by foreign energy companies.

That is the key finding of a recent analysis from Wood Mackenzie’s Asset Risk Index (ARI) Service, which observed that governments in Mexico City and – to a lesser extent – Buenos Aires are leading efforts in Latin America to rein in the regulatory volatility, heavy state intervention and dominance of national oil companies (NOC) that have become more commonplace in the region during the past decade. By introducing significant reforms and incentives over the last year, however, Argentina and Mexico are trying to cultivate a more investor-friendly environment. The shift stems from a desire to reverse production declines, achieve greater industrialization and garner more tax revenues, pointed out the author of the study.

“States are signaling more pragmatism regarding local content requirements and more receptiveness to foreign investment,” stated RoseAnne Franco, Country & Asset Risk Manager for Wood Mackenzie. “While NOCs will continue to play an important role in the industry, governments are also demanding more transparency and accountability.”

Franco recently shared her insights with Rigzone about the evolving upstream investment outlook for Argentina, Mexico and other countries in Latin America. Read on for excerpts from the conversation.

Hess To Form MLP For North Dakota Oil, Gas Transport Assets
Saudi Aramco plans to invest $40 billion a year over the next decade to keep oil production capacity steady and double gas production, CEO Khalid Al-Falih says.

Reuters

STAVANGER, Norway, Aug 25 (Reuters) – Saudi Aramco, the world’s biggest oil producer, plans to invest $40 billion a year over the next decade to keep oil production capacity steady and double gas production, Chief Executive Khalid Al-Falih said on Monday.

State-owned Aramco sees more capital going into offshore projects and expects rising costs across the oil sector to underpin oil prices, Al-Falih told a conference.

Oil prices fell to a 14-month low of $101.07 last week as global demand growth weakens, even as production ramp ups in several places create a glut of oil.

“To meet forecast demand growth and offset (global output)decline, our industry will need to add close to 40 million barrels per day of new capacity in the next two decades,” Al-Falih said.

“Although our investments will span the value chain, the bulk will be in upstream, and increasingly from offshore, with the aim of maintaining our maximum sustained oil production capacity at twelve million barrels per day, while also doubling our gas production.”

Al-Falih said that the Organization of the Petroleum Exporting Countries or the International Energy Agency should not try to control oil prices but fundamental problems within the industry, like rising costs, increasing technical challenges and the falling size of finds would support the price.

“I share … the belief that this is a market driven business, it’s not OPEC, the IEA, and consumers that should be in the business of trying to control the market,” Al-Falih said. “OPEC will take the price as it comes.”

“To tap these increasingly expensive oil resources, oil prices will need to be healthy enough to attract needed investments … (and) long-term prices will be underpinned by more expensive marginal barrels.

RIGZONE

 



8 Comments on "Saudi Aramco Plans To Invest $40B A Year For The Next Decade"

  1. Plantagenet on Mon, 25th Aug 2014 12:05 pm 

    They can spend all they want but they won’t stop KSA oil production from falling once Ghawar peaks

  2. Speculawyer on Mon, 25th Aug 2014 12:51 pm 

    I think they’ll need to invest that much just to keep oil production steady.

    BTW, did they ever find much natural gas in Saudi Arabia? I know they’ve been looking for it in the last 10 years so they can switch their domestic electricity generation to natural gas so they can export the oil that is currently being used to (wastefully) generate electricity.

  3. Bob Owens on Mon, 25th Aug 2014 12:53 pm 

    After ISIS gets finished with them there may not be any oil at all. Time to go solar is growing really short! The same thing that happened to Libya is going to happen to KSA.

  4. longtimber on Mon, 25th Aug 2014 1:27 pm 

    Doesn’t the US now spend something like 900B/year on Oil Imports?

  5. rockman on Mon, 25th Aug 2014 1:49 pm 

    Seems there’s a simple question to ponder: from 2002 to 2008 oil prices steadily tripled. So why has it taken the KSA at least 10 years to consider ramping up development projects? It’s been 6 years since oil prices have hung around $100/bbl. So if the KSA had almost $1/2 Trillion of economic projects identified why have they waited?

    But there seems to a hint in their comments that this new big budget will require significantly higher oil prices. But we’ve seen the effect of higher prices to kill demand. Of course the entire premise is based upon the assumption that even at much higher prices such potential projects capable of replacing current production. Since the KSA offers no evidence of the potential for $trillions in undeveloped reserves it’s impossible to judge the validity of their assertions. Given all oil production rights belong solely to the gov’t there doesn’t appear to be a reason to keep such information confidential IMHO.

  6. redpill on Mon, 25th Aug 2014 7:37 pm 

    “To meet forecast demand growth and offset (global output)decline, our industry will need to add close to 40 million barrels per day of new capacity in the next two decades,” Al-Falih said.

    So, in the next 20 years, we only need to replace the current capacity of Russia, Saudi Arabia, the U.S., Iran, China and Canada.

    Uh, what’s the IEA’s 20yr projection for oil prices again? Think I might just put some chips on the Over.

  7. toolpush on Mon, 25th Aug 2014 9:14 pm 

    “They can spend all they want but they won’t stop KSA oil production from falling once Ghawar peaks”

    You don’t think Ghawar has already peaked? How come they keep bringing on line all these other fields at the rate of approx half a million barrels a day per year, yet their total oil production has basically flat for the last few years?

    They could be resting Ghawar of course, saving it for when they really need it. /sarc

  8. Nony on Tue, 26th Aug 2014 6:31 am 

    1. 4B/year seems pretty small given the size of the SA oil/gas industry.

    2. What ever happened to all the conspiracy theory “watering out Ghawar” stuff from Simmons, Saniford, etc. It’s been 10 years now since they were spouting that stuff. SA was already supposed to have ‘crashed into the desert’.

    3. SA is well known to try to manipulate the price of oil by withholding supply.

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