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Saudi Aramco launches project review amid declining oil prices

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By Andrew England in Abu Dhabi

Published: November 5 2008 02:00 | Last updated: November 5 2008 02:00

Saudi Aramco, the world’s biggest oil company, is reviewing some of its long-term projects following the sharp decline in oil prices and a dramatic slowdown in demand growth for crude, a senior official said yesterday.

“We are going back to our partners and discussing with them the new economic circumstances,” said Khaled al-Buraik, an executive director at Saudi Aramco. “We are not talking about delays, we are talking about reviewing.”

He said a decision on the projects would be made based on the revaluation process.

Mr Buraik said the company’s short-term projects were on track and the kingdom would reach its target of increasing production capacity to 12.5m barrels a day by the end of next year.

But the development of the Manifa field, which was intended to add 900,000 barrels per day of capacity by 2011, was under review, he said.

A project to produce gas from the Karan field – the kingdom’s first offshore free-gas field to be developed – is also being revaluated, he said. That field was intended to provide production of 1.5bn cubic feet per day of gas by 2012 and help meet Saudi Arabia’s soaring energy demands.

Aramco, the biggest oil company by production, was estimated to be spending $129bn on its energy expansion plan, and its decision to review projects is another illustration of how the oil-rich Gulf is being affected by the global slowdown.

“We are meeting our 12m barrels [next year], and we are meeting our spare production capacity of 1.5m to 2m barrels per day, beyond that everything is depending on the market and the decline rates,” said another senior Aramco official. “All the portfolio that will be coming later on is being looked at. Any company would be doing that at this stage.”

Only five months ago, Saudi Arabia said it would add an additional 2.5m barrels of capacity, on top of the 12.5m, if needed, at a hastily convened conference of producers and consumers in Jeddah. The meeting was organised by King Abdullah, the Saudi ruler, as oil producers came under intense western pressure to raise output in an attempt to stem the rise of oil prices.

But the price of crude has dropped dramatically since July and demand forecasts have slumped. Last month, the Organisation of the Petroleum Exporting Countries agreed to cut its output quota by 1.5m barrels a day at an emergency meeting in Vienna.

Weak demand, Page 24

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