Saudi Arabia Boosts Oil Production to 11 million Barrels Per Day


Sept 29, 2004 Jeddah - With oil prices soaring to record highs, Saudi Arabia announced it would increase its production capacity to 11 million barrels per day (bpd) within weeks in a bid to curb the prices.

Minister of Petroleum and Mineral Resources Ali Al-Naimi said the Kingdom was monitoring developments and working for market stability and would activate two additional oil wells to raise its production capacity to reach 11 million bpd over the coming weeks.

"Saudi Arabia is closely monitoring developments at the international oil market and is seeking to stabilize the market and curb the escalation of prices that could be detrimental to the growth of the world economy, particularly that of developing countries," Naimi said in a statement carried by the Saudi Press Agency.

He said the Kingdom was fully prepared and well equipped to meet the oil requirements of its customers for any additional quantities of oil. The Kingdom, he added, was also ready and capable of making up for production shortfalls occurring anywhere in the world.

The minister's announcement came after oil prices moved above $50 a barrel. Crude oil futures traded above $50 at the open market yesterday for the first time ever in regular New York trading. US light crude touched a high of $50.47 a barrel before easing to $49.80, up 16 cents on the day. London's Brent crude set a new peak at $46.80 a barrel.

Analysts attributed the unprecedented increase in oil prices to a number of factors including unrest and continued violence in many parts of the world as well as the legal and supply woes in Russia.

The effect of the increase in the foreign exchange market made the yen the main victim with Japan being a net importer of crude. In contract, the euro gained while analysts expected the United States to suffer the biggest fallout from an escalated oil price.

Naimi said the Kingdom will use the Abu Saafah and Qatif fields in which production has already started and will accelerate drilling in existing wells in order for production capacity to reach 11 million bpd.

"Saudi Arabia is desirous to provide adequate production capacity as soon as possible and for this purpose will use the Abu Saafah and Qatif fields which are now on stream to hike its production capacity to 11 million bpd. In this regard well drilling in producing fields will be intensified," he said.

A project to develop Abu Saafah and Qatif fields was initially slated for completion in October this year.

The development of the onshore and offshore facilities along the Arabian Gulf coast would also produce 370 million cubic feet of associated gas daily.

Reserves in the two oil fields are estimated at 14.5 billion barrels.

Naimi said the move would give the Kingdom, which is currently pumping 9.5 million bpd, a surplus output capacity of 1.5 million bpd. The bulk of the increment from the fields, which recently came on stream in the Eastern Province, will be of the Arabian Light Crude, he said.

Saudi economist Insan Bouhlaiga said oil markets are troubled due to the lack of additional production capacity among OPEC members.

"While necessary, the move was not sufficient to have a long-term effect on prices, which are subjected to several geopolitical and psychological factors", Bouhlaiga was quoted by Agence France Presse as saying.

So far global economic growth has withstood the impact of higher energy costs. In real terms, stripping out the impact of inflation, oil prices are now near levels hit during the Arab oil embargo of 1973-74, though much lower than the record $80 annual average high following the 1979 Iranian revolution.