Inconsistencies in Saudi Arabia offshore strategies, analyst claims

Kuwait and Saudi Arabia have still not resumed production from the Khafji field in the offshore zone between the two countries.

Offshore staff

FAVERSHAM, UK – Kuwait and Saudi Arabia have still not resumed production from the Khafji field in the offshore zone between the two countries.

According to analyst Douglas-Westwood (DW), the Saudis ordered the project to be shut in in October 2014 due to environmental regulation breaches.

Although the two countries agreed on resumption in March, Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman recently halted proceedings, moving to block the addition of oil from Khafji to global markets.

Salman’s opposition to Khafji, DW said, appears to be in direct conflict with the country’s expansion at Saudi projects such asSafaniya, one of the world’s largest offshore oil fields with a current production capacity of 1.2 MMb/d, and where Aramco is reportedly preparing a tender to expand the facilities.

This will likely add significant volumes to Saudi Arabia’s production capacity, a move that will do little to encourage oil price traders.

If the oil prices subsequently drift down again this could reduce the ultimate value of Saudi Aramco’s public offering.

Although the Kingdom is looking to diversify its governmental revenues, this hinges on healthy crude oil export revenues – something that is not possible in a world of low oil prices, DW pointed out.

05/09/2016

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