March 25, 2021 [Hellenic Shipping News] Saudi Aramco is conducting engineering analysis for how to expand its maximum sustained crude oil production capacity to 13 million b/d, but the work could be pushed forward if market conditions require extra Saudi supplies, CEO Amin Nasser said March 22.
That [capacity expansion] will come in increments. They don’t have to come all at one time, over the next few years,” Nasser said, during Aramco’s 2020 financial results call March 22. “We can accelerate if the market calls for it, but the work at the moment is at the detailed engineering phase.”
As Saudi Arabia and Russia launched a price war in March 2020 after the collapse of the OPEC+ production cut negotiations, the Saudi Ministry of Energy directed Aramco to add about 1 million b/d to its current production capacity of about 12 million b/d.
This 13 million b/d target does not include output from the Neutral Zone oil fields, which are owned jointly with Kuwait with production split evenly between the two countries, Nasser said.
Crude oil production at the Neutral Zone’s onshore Wafra field resumed July, after being shuttered in 2015. The offshore Al-Khafji oil field, also in the Neutral Zone, temporarily reopened this year after being shut since 2014.
Aramco’s share from the fields is between 50,000 b/d and 60,000 b/d, Nasser said, as total production is about 120,000 b/d.
“It is ramping up,” Nasser said, adding that capacity before the fields were shut down was about 300,000 b/d.
Aramco announced March 21 that it was planning to spend $35 billion on capex in 2021, down from previous guidance of $40 billion to $45 billion. That is up from 2020’s $27 billion capex budget.
Company officials said about 25-30% of the increase would be dedicated to downstream sector, with the rest divided equally between oil and gas upstream.
Nasser reiterated his expectations that global oil demand would fully recovery by the start of 2022. China’s oil demand was already higher than pre-pandemic levels, he noted, and while Europe and the US are still lagging, the deployment of vaccines should enable a speedy recovery, he said.
“We are looking at 92 million b/d to 94 million b/d today [for global demand], and about 99 million b/d by end of 2021. We are very bullish about demand going forward,” Nasser said.
Hydrogen over LNG
Following comments he made in October that Aramco has postponed its immediate plans to develop its LNG sector, Nasser said in the call the company would “skip” LNG in favor of hydrogen.
The company’s immediate gas priority is ensuring enough supplies domestically for the kingdom to stop using oil in its electricity sector. Once that capability is built up, Aramco will look to scale its hydrogen business, Nasser said.
“In the kingdom, we will focus on hydrogen, looking at hydrogen in terms of utilization and exporting part of it, rather than LNG,” Nasser said. “Depending on our requirements within the kingdom, if there is additional gas, and currently we are looking at shifting it to blue hydrogen instead of LNG.”
Aramco made the world’s first blue ammonia shipment – from Saudi Arabia to Japan – in September.
This was a pilot project, and the company is now undergoing work to develop plans on a larger scale, Nasser said.
“Commerciality also depends on the market and offtake agreements that will be done globally,” Nasser said, declining to reveal the financial terms of that first ammonia shipment..
Aramco achieved a net income of $49 billion in 2020, tumbling by 44.4% from its 2019 profits, amid the economic impact and demand destruction caused by the pandemic, according to its financial results for the year.
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