Readers may recall Leslie Stahl’s trip-happy-trip to the magic Saudi Kingdom last December, on 60 Minutes. If you missed that bit of Willie Wonka Choclat-ism, you can review my post here: Open Secret: the 60 Minutes Report on Saudi Oil.
In addition, I just checked the CBS website and you can still watch the piece just as it aired on TV. My central observation about the 60 minutes coverage was as follows: given the massive size of this field’s infrastructure and the fact that millions of gallons of seawater will be needed to extract its oil, we can now conclude that even in Saudi Arabia, the easy oil is gone.
Look at the size of the complex, in the above photo. The scale is comparable to an oil sands project in Northern Alberta, with its years of pipes and preparation before a drop of oil begins to flow. This is no simple straw in the sand. Khurais is a true mega-project.
Whether Khurais is currently on schedule or is seriously delayed is not quite clear. The Saudis have become masters of obfuscation over the years, using a wide-dispersion method of disclosure. Essentially, they get lots of different people to give a range of timelines and projections on the future plans of Saudi Aramco. We do know that Khurais will have cost at least 10 billion by the time it starts to pump. And presently, the Saudis are insisting that Khurais will start up this June. We shall see.
What amazes, however, is the amount of seawater needed to loosen the oil from this “new” field. While Khurais was indeed discovered 50 years ago and developed a little, the formation behaves more like a dying giant than a new provider. From over 100 miles away, two million gallons of seawater will have to travel each day by pipeline to extract Khurai’s oil. There is simply not enough natural pressure.
The most recent data from EIA Washington shows Saudi crude oil production is now down (on voluntary OPEC cuts) from the July 2008 high of 9.70 Mb/day, to 8.127 Mb/day in January. Even if Khurais does come on stream this summer, one wonders how Saudi will handle this extra production at a time when they have already cut one and half million bbls a day from current supply.
Of course, if you believe Saudi Arabia’s productive capacity is in decline, and that Ghawar is getting ready to pull a Cantarell, then you won’t see current supply cuts as voluntary and will assume Saudi needs all the oil they can produce. I will only offer my view that such a position, while not easily supported, is not unjustified.