Thought I would take the time to point out some of the things that have been happening in Saudi Arabia since the megaprojects. For those who can’t remember the megaprojects were undertook by Aramco to bring on additional oil production capacity from older fields that had been underperforming (eg. Haradah), were shut-in and suspended previously (Khurais) or had other challenging issues (Shaybah, Manifa). The plan was to achieve a 12.5 MMb/d spare capacity (spare capacity being used in the SPE terminology of production which can be achieved within 30 days with little additional capital influx). According to Aramco annual reports and a number of SPE papers all of these projects have been completed as planned. Manifa one of the largest offshore heavy oil fields had been delayed for a very short period due to a lack of demand for crude type but eventually Aramco proceeded and by the end of 2013 Manifa was up to a 900,000 bopd capacity. Shaybah was a better result than anticipated and ended up being a 1 MMbopd capacity versus the planned 700,000 bopd capacity. Aramco has stated they see no need to further expand spare capacity for the next decade and instead have focused their activities on oil field development and natural gas E&P.
One of Aramco's main focus areas has been in terms of what it refers to as the Intelligent Field Program. This program merges initiatives with regard to Real Time drilling operations, Real Time geosteering, Intelligent field operations and Event Solution Field development into one overall program that coordinates all of these formerly separate activities. The idea was first described in print in
SPE 129706, Abdulkarim et al, 2010, Overview of Saudi Aramco’s Intelligent Field Program.. Basically all aspects of the field from drilling through production through intervention is remotely monitored using downhole and above ground sensors which allows decisions to be made immediately that previously would have taken days to weeks and in many cases identifies potential issues before they happen. Aramco built a huge data centre in order to handle monitoring of the massive amounts of data coming from fields and additional put upgrades to their super computer system that allows for integration of the subsurface monitored data into the finite element production simulations. Aramco notes that as of the end of 2015 they had 19 Intelligent Fields and are planning on converting all of their fields to Intelligent Fields over the next number of years. They also state that the work made possible by Intelligent Field design will allow them to move average recovery factor to 70%. This is important given that back in 2005 when we started discussing Saudi Arabia in detail Aramco’s view was a 50% overall recovery was reasonable (and many in industry thought that was aggressive). So basically that is a 40% uplift on recoverable reserves and this is one of the reasons Aramco indicate they have been able to continually replace recoverable proven reserves through the reserve recertification process.
Throughout the period following the mega projects Aramco continued to explore for both oil and gas. The following chart shows the number of discoveries made in new oil and gas fields in the period 2010 – 2015 and the total number of fields that have been discovered historically (as is normal Aramco makes no claim as to reserve size for these discoveries but discovery well production rates seem to be reasonable). In addition, Aramco have noted they continue to make new reservoir discoveries in-field from zones that previously had either not been tested or were by-passed. As an example in their 2010 annual report they note they had added 6 new oil reservoirs and 3 new gas reservoirs to existing fields.
Probably the more interesting story coming out of Saudi Arabia is it’s continually accelerating push for natural gas including unconventional. This shouldn’t be surprising given the ever increasing local demand for oil. This is shown in the two following charts.
In a recent paper (where the above chart is included)
SPE 172955-MS, Case, M et al, 2015, The Opportunity Cost of Exploration for Unconventional Gas in Saudi ArabiaThe authors go to great lengths to calculate out the value of offsetting local oil consumption with gas either from gas imports from Qatar by pipeline, LNG imports or production of conventional and unconventional gas in Saudi Arabia. What the authors found was it made very good economic sense for Saudi Arabia to develop it’s own gas supply and that unconventional gas was an economic tradeoff for burning oil.
My own way of looking at this is through energy offset. Currently Saudi Arabia is consuming 3 MMB/d that could otherwise be exported. In terms of energy equivalent that would equate to an offset of 17 Bcf/d on top of the current Kingdom’s gas production of 8 Bcf/d. The value here is obvious if at their netback for oil is 440/bbl then that would equate to an additional $43 billion US in revenues per year which would almost offset their current budget deficit. Saudi Arabia has been steadily increasing it’s conventional reservoired gas production specifically in the offshore Arabian Gulf as well as in the northern Red Sea. At the same time they have been aggressively pursuing an unconventional gas program since 2013. Their main focus appears to be currently in the area in and around Ghawar from tighter carbonate formations as well as in the Rub al Khali. In 2013 they drilled 29 exploration wells focused on testing unconventional reservoirs and investigated various programs of horizontal multi-stage fracking, micro seismic and various fracking fluids. As well Aramco points to advances made in high resolution seismic that allows them to identify “sweet spots” in unconventional reservoirs. To date they have identified 7 potential targets including Khuff tight carbonates, Unayzah, Jauf, Qusaiba, Sarah and Saq tight sandstones and Qasim shales. It should be noted that in North America tight sandstones have generally been the most prolific producers versus shales which should lower the risk somewhat for Saudi Arabia. It is early days for them obviously but they state that gas from unconventional discoveries in the northern areas will be delivered to new facilities at Wa’ad Al Shamaal by the end of 2017 when those facilities are commissioned.