Saudi Aramco to bring on significant incremental capacity from 2024: CEO

Saudi state-run energy giant Aramco's path to boosting production capacity to 13 million b/d by 2027 will come in increments starting in 2024, as the world's largest oil exporter will expand four fields, its CEO said March 21.

The onshore Dammam field in eastern Saudi Arabia will add an initial capacity of 25,000 b/d by 2024, doubling to 50,000 b/d by 2026, according to a presentation shown to analysts attending the company's full-year earnings call.

The offshore Marjan and Berri fields will add 300,000 b/d and 250,000 b/d respectively by 2025, and the offshore Zuluf field will cap off the expansion with 600,000 b/d by 2026, the presentation showed.

It adds up to 1 million b/d of new production capacity, as Aramco invests tens of billions of dollars to help it meet what it says will be growing global demand for crude in the years to come.

"With regards to the 1 million b/d increments by 2027, it's going to come gradually," Amin Nasser, Aramco's CEO, told analysts attending the briefing. "It's not one big increment that will come in 2027."

Saudi Arabia pumped 10.25 million b/d in February, according to the latest Platts OPEC+ survey by S&P Global Commodity Insights. Aramco holds the exclusive rights to produce oil within the kingdom's borders.

The country has been heavily lobbied by consuming countries to tap into its spare production capacity to help ease the market tightness caused by western sanctions on Russia, but has so far rebuffed the requests.

Aramco's aggressive capacity expansion is to serve long-term demand trends, Nasser said.

The company announced the expansion in March 2020, as Saudi Arabia prepared to launch a market share battle after OPEC and Russia could not agree on production cuts to combat the impact of the pandemic on the market.

That spat was patched up after a month, and the OPEC+ alliance subsequently instituted historic output quotas that are still being gradually unwound.

Until the earnings call, Aramco had not revealed much about its plans to achieve the capacity expansion.

To support the efforts, Aramco is significantly boosting its capital expenditure budget for 2022 to $40 billion-$50 billion, up from the 2021 level of $31.9 billion, as the company benefits from higher oil prices.

The company will dedicate 30% of the projected spend for upstream oil, 27% for gas and "a third" for downstream, Aramco CFO Ziad al-Murshed said on the call.

The wide range of capex spend is largely to account for "projects and joint ventures in downstream" that are external investments.

Gas expansion

Saudi Aramco also plans to significantly expand its gas production, channeling some of the fuel towards new, cleaner forms of energy such as blue hydrogen.

The company plans to increase its gas production by more than 50% by 2030, tapping into vast unconventional reserves such as the Jafurah gas field.

"It's very profitable for us and we anticipate that by 2025 we will start production," Nasser said. Gas production at Jafurah will reach 2 billion scf/d by 2030 from 300 million scf/d currently, he said.

"A good amount" of the Jafurah project will be dedicated towards the manufacture of blue hydrogen, which Aramco and its UAE counterpart ADNOC are prioritizing for investment.

The company will also look to tap ethane and liquids from the Jafurah development that will in turn be used to develop the country's petrochemical sector and will also be used for export.

Oil-to-chemicals

The company is also significantly allocating its crude for conversion into high value chemicals, quadrupling its currently capacity of 1 million b/d to reach 4 million b/d by 2030.

Aramco's current oil-to-chemicals capacity will also include assets under SABIC, which it acquired in 2020.

The company will explore opportunities with China, India and other countries in Asia and will be tapping into "highly integrated refining complexes" with more than 50% conversion rates, Nasser said.

"We do have a catalytic cracking and thermal cracking technology that catches 60% to 70% of the barrels to chemical but it will depend on our partners," he said.

The company will announce partnerships through the year in addition to its currently investment in China, he said.