With one-fourth of the world's proven oil reserves, Saudi Arabia is likely to remain the world's largest oil producer for the foreseeable future. For the first 8 months of 2000, Saudi Arabia supplied the United States with 1.5 million barrels per day of crude oil, or 16 percent, of U.S. crude oil imports during that period.
Information contained in this report is the best available as of November 2000 and is subject to change.
Saudi Arabia's proven gas reserves are estimated at 204.5 trillion cubic feet (Tcf), ranking fifth in the world (after Russia, Iran, Qatar, and the UAE).
Most (around 2/3) of Saudi Arabia's currently proven gas reserves consist of associated gas, mainly from the onshore Ghawar field and the offshore Safaniya and Zuluf fields.
The Ghawar oil field alone accounts for one-third of the country's total gas reserves. Most new associated gas reserves discovered in the 1990s have been in fields which contain light crude oil, especially in the Najd region south of Riyadh. Most of Saudi Arabia's non-associated gas reserves are located in the deep Khuff reservoir, which underlies the Ghawar oil field.
Another gas field, called Dorra, is located near the Khafji oil field in the Saudi-Kuwaiti Neutral Zone and may be developed by Japan's AOC.
Gas also is located in the countries extreme northwest, at Midyan. In early 2000, Saudi Arabia reportedly decided not to move ahead with development of Midyan, which included provision of gas to the Tabuk power station.
With domestic gas demand growing rapidly, increasing gas production is a priority for the Saudi government, with gas development slated to consume a large share of Aramco's budget (in late 1999, Aramco decided to invest $45 billion over 25 years on upstream gas development and processing facilities).
Saudi Arabia is considering allowing foreign investment in the natural gas sector. Additional gas production is being encouraged as a feedstock for the country's growing petrochemical industry, as well as for electricity generation, desalination plants and other industrial establishments, and as a replacement for direct oil burning.
Using gas instead of oil domestically will help free up additional crude oil for export. To date, Saudi Arabia has not expressed great interests in liquefied natural gas due mainly to doubts regarding economic viability.
In September 2000, tests at Ghazal No. 1, located on the southern tip of the giant Ghawar oil field and west of the Haradh gas field, indicated a significant gas discovery, and represented the eighth gas or condensate discovery in the area under Saudi Arabia's stepped-up gas exploration program.
Domestic demand is driving a $4.5-billion expansion of Saudi Arabia's Master Gas System (MGS), which started up in 1982. Previously, all of the country's natural gas was flared.
In November 1996, a project management contract was signed with U.S.-based Parsons Corp. for construction of a $1.9-billion, 2.4-billion-cubic-feet (Bcf)-per-day gas processing plant at Hawiyah. Others involved at Hawiyah, located south of Dhahran and east of Riyadh, include Japan's JGC, Argentina's Techint, and Italy's Technip.
Hawiyah represents the largest Saudi gas project in more than 10 years, and is to be completed by 2002. The Hawiyah plant plus the debottlenecking of three other existing plants (Berri, Haradh, Ras Tanura) is to boost Saudi Arabia's gas processing capacity to 6.3 Bcf per day by 2002.
In other news, a key pipeline project was completed in June 2000 to extend the MGS from the Eastern Province (which contains large potential gas and condensate reserves) to the capital, Riyadh, in the Central Province.
Saudi Arabia's rapidly growing population is increasing demand on electric utilities, as power demand grows by 5 percent or more each year. Saudi Arabia's Industry and Electricity Ministry estimates that the country will need up to 70,000 megawatts (MW) of power generating capacity by 2020 (compared to 25,000 MW currently, of which about 65 percent is gas-fired), at a cost of more than $110 billion.
Most of this will need to come from the private sector, possibly including foreign investors. Meanwhile, new industrial projects have been delayed and brownouts have occurred due to inadequate power supplies, especially during the summer peak cooling demand season. Privatization of Saudi Arabia's electricity sector is under consideration, as is a division into three parts -- generation, transmission, and distribution.
On February 16, 2000, Electricity Minister Dr. Hashem Ibn Abdullah Yamani signed a merger agreement between Saudi Arabia's 10 existing power companies, and on April 5, 2000, the long-anticipated Saudi Electric Company (SEC), a joint-stock company owned 50 percent by the Saudi government, was established.
SEC was formed from the country's 10 regional power companies (including the four "SCECO"'s -- East, West, Central, and South -- which controlled 85 percent of the country's power supplies).
The four SCECO companies had operated at a loss because they had been required to sell power below cost to Saudi consumers, as well as due to inefficiencies and difficulties with non-payment of bills.
The government for years has subsidized the cost of electricity and has paid a guaranteed dividend to private shareholders. Restructuring of the SCECO system could be accompanied by a more general streamlining/privatization of the Saudi power sector, such as a further splitting of SEC into units dealing with generation, transmission, and distribution companies.
Creation of the SEC also could open the door to private sector construction of new power plants on a BOT (Build-Own-Transfer) basis. The future of IPP's (Independent Power Producers) in Saudi Arabia remains uncertain, however, with major challenges including: tariffs, legal and operating framework, taxation, and fuel supply.
In April 2000, SEC increased power tariffs to major customers, but on October 9, 2000, it announced that it was rescinding these increases (effective October 28) in the face of widespread resistance.
This move was seen as a move away from privatization and reform of the Saudi power sector, particularly as it will reduce SEC revenues and potential profitability.
Several projects now underway employ financing mechanisms that are new to Saudi Arabia's electric power sector. For example, the 1,200-MW, PP9 power station north of Riyadh has been funded with extra revenues generated by a special tariff imposed on heavy users since January 1995.
Expansion of the 2,400-MW, $1.5-billion Ghazlan II power plant is being financed by an internationally syndicated, $500-million, commercial loan (the first such loan in Saudi history). Ghazlan II consists of four units, which are expected to come online, approximately one unit per year, through 2002.
Meanwhile, plans for a $1.7-billion, 1,100-MW, gas-fired power plant at Shuaiba on the Red Sea coast apparently are moving ahead, following a groundbreaking ceremony in May 2000, attended by Crown Prince Abdullah. ABB Asea Brown Boveri had been awarded the contract on a turnkey basis.
The plant is to be constructed in three stages, with the first stage scheduled to come online in mid-2001. Another new plant is a 126-MW, gas-fired plant at the Saudi ARAMCO facility at the huge Abqaiq oil field.
On October 9, 2000, Saudi Arabia approved plans for setting up a new utility company in the twin industrial cities of Yanbu and Jubail. The company, named Marafeq, is being founded by the Royal Commission, the Public Investments Fund, Saudi ARAMCO, and SABIC, with local investors also holding a stake in the company.
Saudi environmental issues are seen related mainly to oil exploration and production. Despite technological advances in exploration and production, offshore oil development continues to have a significant impact on the marine environment, as do oil spills and illegal discharges.
Several air quality initiatives, including the planned introduction of unleaded gasoline into the country in 2001, should reduce Saudi Arabia's level of air pollution, but rising rates of energy consumption and carbon emissions portend possible future problems for the Kingdom.
Oil production and development make the country very energy- and carbon-intensive. Saudi Arabia's plentiful supply of domestic oil and gas reserves has stifled incentives for the country to develop a significant renewable energy sector.
Minister of Petroleum and Mineral Resources: Ali bin Ibrahim al-Naimi (since 8/95)
Minister of Industry and Electricity: Hashim bin Abdullah Yamani
Proven Oil Reserves (1/1/00): 263.5 billion barrels (includes half of Neutral Zone -- NZ)
Oil Production (January-August 2000E; includes NZ): 8.9 million barrels per day (bbl/d), of which 8.2 million bbl/d is crude oil and 688,000 is natural gas liquids (NGLs)
Oil Production (4Q 2000E; includes NZ): 9.3 million bbl/d (8.6 million bbl/d crude)
OPEC Crude Oil Production Quota (as of 10/1/00): 8.512 million bbl/d
Oil Consumption (2000E): 1.3 million bbl/d
Net Oil Exports (2000E): 7.8 million bbl/d
Crude Oil Refining Capacity (1/1/00): 1.71 million bbl/d
Natural Gas Reserves (1/1/00): 204.5 trillion cubic feet (Tcf) (includes half of NZ)
Natural Gas Production/Consumption (1998E): 1.65 Tcf
Electric Generating Capacity (2000E): 25 gigawatts
Net Electricity Generation (1998E): 110 billion kilowatthours
OIL AND GAS INDUSTRIES:
Organization: The Supreme Petroleum Council governs the nationalized oil industry, including Saudi Arabian Oil Co. (Saudi Aramco) crude production, refining and marketing; Saudi Basic Industries Corp. (SABIC) petrochemicals.
Major Foreign Oil Company Involvement: AOC, Mobil, Shell, Texaco
Major Ports: Jeddah, Jubail, Ras al-Khafji, Ras Tanura, Juaymah, Rabigh, Yanbu, Zuluf
Major Oil Fields: Ghawar, Safaniya, Najd, Abqaiq, Berri, Manifa, Zuluf, Shaybah, Abu Saafa, Khurusaniya
Major Pipelines (capacity - million bbl/d): Petroline (4.8), IPSA 1 (0.5), IPSA 2 (1.7), Abqaiq-Yanbu NGL line (0.4), (note: IPSA I shut since 1990)
Major Refineries (capacity, 1/1/00): Aramco - Ras Tanura 325,000 bbl/d, Rabigh 325,000 bbl/d, Yanbu 190,000 bbl/d, Riyadh 140,000 bbl/d, Jeddah 42,000 bbl/d; Aramco/Mobil - Yanbu 366,000 bbl/d; Petromin/Shell - al-Jubail 292,000 bbl/d; Arabian Oil Company - Ras al-Khafji 30,000 bbl/d
Source: United States Energy Information Administration.
© 2000 Mena Report (www.menareport.com)