Saudi Aramco is pressing ahead with several offshore incremental programmes in its bid to expand oil production capacity to 13 million barrels per day before the end of the decade.
The Saudi Arabian state-owned giant is carrying out multiple incremental projects at some of the country’s largest offshore oilfields, including Marjan, Zuluf and Berri.
Aramco recently said front-end engineering and design work is under way for its capacity expansion plans, with most of the incremental capacity likely to be added from the offshore fields.
While Aramco has awarded key engineering, procurement and construction contracts for the Marjan and Berri incremental projects, the EPC work on Zuluf expansion is in the tendering stage, with multiple onshore and offshore projects on offer, Upstream understands.
The much-delayed Zuluf development is expected to cost up to $8 billion and aims to boost the country's crude output by as much as 600,000 barrels per day, almost doubling the field’s production capacity.
Zuluf is said to be producing about 550,000 to 600,000 bpd of oil from the Arabian Medium reservoir and Aramco is targeting additional volumes from the Arabian Heavy reservoir in its next expansion phase.
Aramco earlier this year tendered for a quintet of offshore jobs for Zuluf that combined are likely to be valued upwards of $5 billion.
In addition to the Zuluf offshore projects, EPC players are chasing two packages for the field's onshore scope that together are believed to be worth more than $2.5 billion.
Along with the greenfield developments, Aramco has also been spending heavily on brownfield and offshore maintenance contracts that are exclusively offered to a group of long term agreement (LTA) players.
Aramco has been spending between $1.5 billion and $2 billion each year on LTA projects, but cash flows nosedived last year as the pandemic dragged regional economies into a sustained slowdown.
However, LTA spending this year has recovered substantially on the back of higher crude prices and improved market fundamentals.
Multiple offshore LTA EPC contracts have moved into the tendering stage, with Aramco expected to float several over the coming months.
The company’s LTA programme aims to rejuvenate oil and gas production from the country’s maturing oilfields.
Aramco plans to spend $35 billion this year in light of the improved market.
The company has said it “maintains a highly disciplined and flexible approach to capital allocation.”
Aramco spent $27 billion last year after budgets were slashed because of the pandemic, leading to project postponements as well as delays in payments to key contractors.
Capex this year is a significant improvement from 2020 but is much lower than its previous guidance of $40 billion to $45 billion.
Aramco said its increased spending this year is “primarily due to the start of initial phases of construction and procurement activities relating to increment projects, demonstrating the company’s ability to mobilise capital to target growth opportunities”.