Saudi could pump less oil despite gas issues
Feb 4th, 2009 | By Oil and Gas | Category: Latest News
Top oil exporter Saudi Arabia may cut output more, as it seeks to put a floor under oil prices, in spite of the challenges that would pose to domestic energy supply and to its budget.
The kingdom plans to pump in February below its Opec (the Organisation of the Petroleum Exporting Countries) target of 8.05 million barrels per day (mbpd), undershooting what was already a record Opec supply cut agreed in December.
“The Saudis know that extraordinary times require extraordinary measures,” said David Kirsch of Washington-based PFC Energy.
“If measures are needed to stabilise the oil price and market at lower production levels, they’ll be prepared to take them. They are ready for a year of deficit, and they finance that for longer than other producers.”
Saudi oil infrastructure is in better shape than that in most of its Opec peers to pump less without damaging fields, analysts and industry observers say.
It has shown in the recent past it has the capacity to both accelerate and slow production, Kirsch said. It raised output to 9.6-9.7 mbpd last summer, after paring it to 8.6 mbpd in early 2007.
“You don’t get that kind of performance out of a sector that is in plateau or decline,” Kirsch said. Saudi Aramco’s hi-tech approach allows it to monitor reservoirs and limit the potential for damage as output slows, said Sadad Al-Husseini, a former top executive at the state oil firm. “Saudi Aramco is well ahead on all of this on,” Husseini said. “It’s been done enough times that they can do it without damaging systems and reservoirs.”
Industry sources say the kingdom will cut output to 7.7 mbpd in February, already the lowest level in more than six years and around two mbpd below July.
But cutting output further could exacerbate a domestic shortage of gas. Like its Gulf neighbours, Saudi has seen gas demand for power generation and heavy industry grow rapidly with a petrodollar-fuelled economic boom. (source: www.oilandgasnewsworldwide.com)
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