Saudi Arabia: A Whole New Drill

Anticipating a rise in long-term demand, the kingdom is ramping up production

Saudi Arabia’s image as master of the oil patch has been taking a beating of late. For months global markets have fretted that the Saudis can’t or won’t produce enough oil to keep a lid on soaring prices. Politicians around the world are blasting the kingdom for failing to open the taps more. And Houston investment banker Matthew R. Simmons has captured headlines with his book Twilight in the Desert, which says that Saudi production may be peaking and an oil shock bigger than the current one is on the way.

Yet, little noticed by the outside world, the Saudis are making some bold moves. In recent months, Saudi Aramco, the national oil company, has been rapidly inking deals with drilling rig operators and oil field contractors. Some 70 drilling rigs are now operating in the kingdom, up from 55 in 2004 and about 20 in the mid-1990s.
BIG GAINS. By next year, Aramco aims to have 110 rigs drilling, although that may be unreachable because of fierce competition for equipment.

It’s all part of a massive effort to add some 3 million barrels per day of production capacity — comparable to a large producer such as Kuwait or Venezuela. That would be a more than 30% leap over the roughly 9.5 million barrels per day Saudi Arabia is now producing, although in a pinch it claims that it could get output up to 11 million barrels.

Business Week