Global Economics

Inside Saudi Arabia's New Mega-Oil Field


Saudi Aramco is spending $10 billion to retool the Al Khurais field to produce 1.25 million barrels of light crude a day

In the aftermath of their emergency meeting on high oil prices (BusinessWeek.com, 06/22/08), the Saudis are on a campaign to show the world that it should not underestimate their capacity to produce oil. Their showcase is a field called Al Khurais, which lies about 100 miles east of Riyadh in flat red desert.

Saudi Aramco, the national oil company, is spending some $10 billion to retool Al Khurais as a monster field with 27 billion barrels of reserves and the capacity to produce 1.2 million barrels per day of desirable Arab light crude. That amount, when it is achieved, will exceed the entire output of some oil-producing countries, such as Indonesia, and is roughly equivalent to the annual increase in world demand for oil.

To get to Al Khurais, one flies into a remote desert location called Pump Station 3 on the East-West pipeline from Dahran to Yanbu. The airstrip is a 50-mile drive from the oil field, and along the road you see herds of black camels, scruffy truck stops where mechanics fix vehicles in the desert sun, and the occasional drilling rig.

Schlumberger and Sinopec Are Here

The numbers for Al Khurais sound impressive on paper, but the field's massive scale can only be appreciated up close. The guts of the infrastructure, known as the central processing facility, stretch for nearly a mile. The workers—there are already 28,000 of them and the number is likely to rise—are covered with protective garb from head to foot and wear hoods that stick out from under their hard hats to shield them from the scorching Arabian sun. They look like aliens, moving about under the girders or hammering together wooden forms for pouring concrete.

Al Khurais' managers say that both Schlumberger (SLB) and Sinopec (SNP) are drilling for them. Seventeen drilling rigs are working on the field, using the latest smart technology that allows employees to remotely monitor pressure and temperature and adjust flow rates. Saudi Aramco also is installing long horizontal wells designed to ensure maximum contact with the oil-bearing rock. Such technologies are allowing the Saudis to cut way back on the number of wells—but they're still drilling about 310 new ones and working over another 110.

Khalid Abdulqader, the project manager, insisted that the field would be ready to produce by June of next year. Over a lunch of Lebanese salads and whole sheep baked in rice, Abdulqader said that preliminary testing indicated that the field might be even more productive than expected.

Taking a Conservative Approach

Al Khurais is the centerpiece of a Saudi effort to lift production capacity from the current 11 million or so barrels per day to 12.5 million barrels daily by next year. Aramco executives want to emphasize that their approach is conservative and long term. To make the point, exploration and production chief Amin Nasser said that Aramco's average depletion rate—the volume of oil it produces a year as a percentage of reserves—was only about 2%. By contrast, he said other producers and international oil companies average 4% to 9% depletion rates. This approach, he said, lets the Saudis deploy better technology and recover more oil than an energy company under pressure to produce as much as possible before its lease runs out.

Overall, the Saudis come off as an exception to the otherwise anaemic supply picture. Many other oil countries, including Nigeria, Russia, Venezuela, and Mexico, are coming up short on output (BusinessWeek, 6/19/08). That leaves the Saudis, who say they are the most reliable suppliers, with an awfully large burden to shoulder.

Reed is London bureau chief for BusinessWeek.

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