Saudi Arabia's oil giant Saudi Aramco is expected to pick up an additional 550,000 bpd of oil production capacity from two giant oil fields in the fourth quarter, so it would be able to increase production if there's demand, Reuters reported on Thursday, quoting a source familiar with the plans.
If Aramco does manage to bring that capacity online, it could give Saudi Arabia another half a million barrels of oil per day of spare capacity at a time when the oil market is expected to tighten with Iranian oil barrels coming off the market with the return of the U.S. sanctions in early November.
According to Reuters's source, the capacity of the giant Khurais oil field will be expanded by between 250,000 bpd and 300,000 bpd, to reach 1.5 million bpd. Another 300,000 bpd of capacity will come from the Manifa oil field, which has a current capacity of 900,000 bpd, although this field has pumped at a reduced rate in past months because of a pipeline issue that is now said to be resolved.
It's not clear if the higher capacity at the two fields would translate into a production boost for Saudi Arabia, which will be looking at many market factors in the fourth quarter to decide which way its production will go. These factors include demand for Saudi oil, the extent of the losses from Iran and Venezuela, how much spare capacity to keep untapped, how much of that capacity can quickly turn into production if need be, and of course, oil prices, even if Saudi Arabia says that it's not aiming for a specific price of oil.
Reports emerged today that Saudi Arabia and other OPEC members have been discussing on the quiet a half-a-million-barrel increase in their combined oil production to keep a lid on oil prices, unnamed sources told Reuters amid growing concern that the Iran sanctions will create a serious shortage in global supply. The increase could be shared by non-OPEC producers as well, the sources said.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
Comments
This is the same with reporting about losses in Iran’s oil exports before any losses have actually materialized. It seems as if this type of reporting is all part of fake news and is no more than a cheap psychological warfare that will not wash.
At one time a hint from Saudi Arabia about oil production could have sent oil prices rocketing or declining. Alas this is no more the case.
Saudi claims about the size of its proven oil reserves, spare capacity and its production capacity are currently under global scrutiny.
Doubts about Saudi reserves were one of two major reasons for the withdrawal of the IPO of Saudi Aramco from the market altogether. The other is the risk of American litigation. King Salman of Saudi Arabia couldn’t have been clearer when he justified his decision to withdraw the IPO for not wanting to expose Saudi Aramco's oil reserves and finances to scrutiny.
Saudi Arabia claims that it has a production capacity of 12.5 million barrels a day (mbd). This can’t in any stretch of the imagination be true because despite repeated calls by President Trump to Saudi Arabia to significantly increase its oil production so as to save his neck at the coming Congressional midterm elections in November, it managed to add only 400,000 b/d to the market and even these did not come from new production but from oil stored on board tankers or on land. Saudi oil production peaked at 9.6 mbd in 2009 and has been in decline since.
Therefore, Saudi claim of having a 2 mbd-spare capacity is very doubtful and is yet to be tested by the market.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London