Saudis to Raise Oil Goals for 1990s, Invest Billions

Saudi Arabia, the world’s biggest oil exporter, plans to spend $15 billion in the next six years to maintain its supremacy in the oil market, regional bankers and oil industry analysts said Thursday.

“Saudi Arabia wants to remain a market leader in the 1990s,” one oil industry manager said. “It also does not want its share within OPEC to erode as world demand grows.”

Oil industry sources in the Gulf said the Saudi Arabian Oil Co. (Saudi Aramco) wants to push the kingdom’s oil output capacity to 10 million barrels a day by 1995 from the current 6.5 million.

The sources said the company was expected to finance the scheme from oil revenue. Because the payments would be spread over a number of years it would not create any strain on its budget, they added.

One industry executive predicted that the Saudis could reach an 8-million-barrel-a-day output capacity by 1992 under the scheme. Current Saudi output is estimated at 5.2 million barrels a day.

Gulf members of the Organization of Petroleum Exporting Countries expect their world market share within the 13-nation group to rise by the turn of the century, in line with a projected increase in world oil demand and a decline in production elsewhere.

Oil industry analysts said Saudi Arabia’s plan to expand output was a clear warning to some of its OPEC partners, and to independent producers who might be planning expensive oil development schemes beyond the year 2000.

“Would you contemplate a new investment in the North Sea if you heard the Saudis will double what they are producing now by 1995?” an oil industry executive said.

Saudi Arabia reached the 10-million-barrel-a-day mark in 1980 and 1981, just as the rise in oil prices to $40 a barrel turned the world off its addiction to cheap oil.

But as demand plummeted, Saudi Arabia’s oil production dropped to as low as 3.04 million barrels a day in 1985, at the cost of a permanent loss of capacity at some fields, the sources said.

Saudi Aramco is already recruiting workers and staff for the new expansion scheme at its headquarters in the eastern province of the kingdom where its vast oil fields are located, they said.

“Saudi Aramco opted for a development scheme scattered over a long period,” one industry executive said. “The job could have been completed in a shorter period, but the costs would have been much higher.”

Oil industry sources said the scheme would bring some older field equipment back into operation, increase recovery rates at some fields and probably develop some new fields.

As its production capacity grows, there will be no problem of exporting the crude because the kingdom’s existing oil loading facilities have a capacity of 14 million barrels a day, Oil Minister Hisham Nazer recently said in an interview.

Saudi Aramco plans to shoulder most of the development project but may use some specialized international oil industry service companies during the six-year program, sources said.

“The first phase of the project bringing back into production existing machinery will be quick and cheap,” an oil industry source said.