Generic Hero BannerGeneric Hero Banner
Latest market news

Saudi Aramco to focus capex increase on upstream

  • Märkte: Crude oil, Natural gas
  • 22.03.21

State-controlled Saudi Aramco will focus a planned $8bn increase in capital spending this year on upstream oil and gas projects that were deferred last year because of Covid-19.

The company said yesterday that it expects to raise capital expenditure (capex) to around $35bn this year, from $27bn last year and $32.8bn in 2019. Just as Aramco's upstream operations bore the brunt of last year's cut in capex, they will benefit the most from this year's rise in spending.

Downstream operations will get around 25-30pc of the planned increase in capex this year, according to chief executive Amin Nasser. "The rest will be dedicated for oil and gas — almost half and half between oil and gas," he told an analysts' briefing today.

Aramco will look to resurrect upstream projects that were postponed in the wake of the pandemic. "We have to bring back some of the investments that we slowed down and deferred, hence the increase in 2021 compared to 2020," chief financial officer Khalid al-Dabbagh said. The $35bn guidance is not a target. Spending could be amended up or down "according to circumstances", al-Dabbagh said.

While Aramco never formally announced which projects were deferred to save costs last year, crude capacity expansions at the offshore Berri, Marjan and Zuluf fields were almost certainly part of the slowdown in investment. Berri was originally due to provide an additional 250,000 b/d of Arab Light by early 2023, while a further 300,000 b/d of capacity is being developed at Marjan, and 600,000 b/d of extra processing capacity is being built at Zuluf.

Nasser revealed today that a 1mn b/d net increase in overall Saudi crude production capacity that the government instructed Aramco to undertake last year will be brought on stream "over several years". The increment will be phased in rather than "coming on stream in one shot", he said. This suggests that the capacity growth will come from existing fields, as opposed to new ones, and that Aramco may change the designation of the Berri, Marjan and Zuluf projects. The firm previously said the three projects were designed to offset natural decline and help maintain Saudi Arabia's overall production capacity, rather than increase it.

Another project that should benefit from Aramco's higher spending this year is the $110bn Jafura shale gas development, which was in its pilot phase in 2019 and got official approval for full development last year. First gas is slated for 2024, but Aramco has not disclosed expected production volumes.

The company's focus on gas output growth will be dedicated to meeting Saudi Arabia's rising domestic gas demand, Nasser said. Any surplus is likely to be used as feedstock for a blue hydrogen export project that Aramco is planning, with carbon dioxide released during the process captured and injected into oil reservoirs or used for other industrial purposes, he said.


Teilen
Generic Hero Banner

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more