Saudi Oil Production

[dan_s]

As Saudis Keep Pumping, Thirst for Domestic Oil Swells Kingdom is poised to break records for crude output, but its ravenous energy needs threaten its ability to ramp up exports

RIYADH—Saudi Arabia is poised to break records for oil production this summer, analysts said, as domestic-energy needs soar during its scorching summer and the holy month of Ramadan and threaten its ability to ramp up exports.

Saudi Arabia has said it produced a near-record 10.3 million barrels a day in May, a mark that industry observers said could increase to 11 million barrels this summer as air-conditioning use increases with temperatures reaching 110 degrees Fahrenheit. The country has the ability to produce 12.3 million barrels a day for 90 days, but it has never pumped this much. Saudi output averaged 9.22 million barrels a day from 2006 to 2014, according to the U.S. Energy Information Administration. Most of its oil is exported.

For the past three years, Saudi domestic energy demand has been rising by about 8% due to an expanding population and new construction and large-scale projects. More than 25% of the country’s crude is consumed domestically by cars, planes, homes and businesses, a figure that rises in the summer and is almost double what the kingdom used in the early part of the last decade. The kingdom’s population has increased 17% since 2005, faster than most developed countries.

At this pace, the kingdom would have to start importing oil by 2030, Citigroup Inc. has predicted, a once unthinkable prospect for the linchpin of the world’s oil market. Khalid al-Falih, the current chairman and former chief executive of the kingdom’s state-owned oil company, Saudi Arabian Oil Co., known as Saudi Aramco, said in 2011 that, if left unchecked, domestic energy consumption would rise to 8.2 million barrels of oil a day by 2030.

Other analysts are doubtful Saudi Arabia would need to import oil. But in a country where subsidized crude still powers most homes and businesses, and a gallon of gasoline costs less than a bottle of water, Saudi Arabia’s ravenous energy appetite is starting to strain the kingdom’s oil infrastructure and hamper its capability to throttle up exports. In order to tap into reserves, the kingdom will need to extract more heavy crude, which requires large investments to sustain.

Ramadan—the month when observant Muslims observe the revelation of the Quran to the Prophet Muhammad—has seen heavy electricity usage, as families break the daylight fast with late-night feasts that strain the power grid in the summer months. Blackouts have become a regular feature of the holy time.

“When it comes to outages, they deliver every year,” said Ibrahim al-Qahtani, a 37-year-old chemical company worker in eastern Saudi Arabia.

Mr. Qahtani’s Ramadan celebrations are typical of Saudi families: long afternoon naps, evenings watching soap operas and long meals that go into the wee hours. The air conditioner is generally on full blast. Ramadan began this year on June 18 and ends July 17.
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I have talked to several of our members that know a lot about Saudi Arabia. They've told me that SA cannot produce more than 10 million bbls per day for long without risking damage to their fields. Most of SA oil comes from giant fields that are on water floods (secondary recovery). If you pull the wells too hard you risk "channeling" of water into the producing wells. - Dan