Saudi Arabia's Energy Industry
Oil reserves297.5 billion barrels
Oil production10.94 million bopd
Gas reserves6 tcm
Gas Production117.3 bcm
Saudi Arabia: Dominance and Diversification
As the second-largest crude oil producer and the largest oil exporter in the world, Saudi Arabia found itself at the heart of the storm when the oil price dropped in the summer of 2014. Historically, the country has often acted as a swing producer, adapting its production to either drive up or suppress the oil price. But feeling the threat of the US shale boom and growing competition from developing markets, the country kept up production this time around, producing 12 million bopd on average in 2015, showing it was willing to fight to maintain its market share. Finally, in late 2016, Saudi Arabia agreed with OPEC on a 1.2-million-bopd cut to its production, which stood at 10 million bopd as of October 2017. The country’s Ministry of Energy, Industry and Mineral Resources worked to extend the cuts through 2017, seeing a deal reached in May of that year.
Saudi Aramco began 2016 with a landmark IPO announcement, saying it could privatise some downstream subsidiaries and offer “an appropriate percentage” of its shares on the stock market. It was later revealed that Aramco would become a holding company, with publicly listed subsidiaries. Proceeds from the IPO, estimated to be in the range of USD 100 billion-150 billion, will be directed towards a sovereign wealth fund for strategic in-country investments. In the meanwhile, the company is keeping investment at a high level. In September 2016, it was announced that Aramco would be spending USD 334 billion between 2016 and 2025. The company will invest in infrastructure, maintenance, power plants, drilling projects, and the development of unconventional resources such as shale oil.
While Saudi Arabia has more than 100 different producing fields, eight of them alone are responsible for the majority of the country’s oil production. Most notable is the Ghawar field, which, with a production of 5.8 million bopd and estimated reserves of 60 billion-70 billion barrels of Arabian Light crude, is the world’s biggest oilfield. A second record belonging to Saudi Arabia’s oil industry is set by the Safaniya field, the world’s largest offshore oilfield. Safaniya is located north of Dammam, in the Gulf, and boasts a production of 1.2 million bopd. The field is estimated to hold reserves of up to 37 billion barrels. Saudi Arabia also holds the world’s sixth-largest natural gas reserves, after Iran, Russia, Qatar, Turkmenistan and the US. The country uses all gas produced and does not trade its gas. Recently, the government has shown interest in developing its natural gas resources to boost its petrochemical and power generation sectors. According to the National Transformation Programme 2020, a government programme launched in June 2016, Saudi Arabia is looking to increase efficiency while utilising hydrocarbons during power generation.
For a comprehensive view of Saudi Arabia’s market, see The Oil & Gas Year Saudi Arabia 2018.
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