Aramco Keeps Capacity Push at Forefront

Saudi Aramco is pressing on with its program to add 1 million barrels per day of oil production capacity, taking it to 13 million b/d by 2027. The state-owned Saudi oil giant is taking the long view, convinced that demand for its low cost oil will remain robust deep into the future — even as it proceeds with a voluntary production cut of 1 million b/d through September to help support today's market. It's clear that neither near-term price volatility nor the accelerating energy transition will unhinge the Saudis' upstream expansion plans. However, Aramco also has its eye on the bottom line, and it appears management is seeking better terms and discounts on new service contracts it is awarding — especially those related to the expansion of several offshore fields where most additional capacity will come from, according to contractors. It is understood Aramco is reviewing the status of three contracts related to the expansion of the giant Zuluf offshore oil field that it awarded to US engineering and construction company McDermott. Sources familiar with the matter told Energy Intelligence that McDermott has been unable so far to secure the required letters of credit for contracts to upgrade Zuluf's existing facilities and install cables and pipelines. If Aramco were to withdraw the contracts, sources told Energy Intelligence they would likely be awarded to Italy's Saipem, which Aramco reportedly has already approached. Saipem had bid on the contract earlier before McDermott got it. Under the expansion plan, Zuluf's production capacity will be raised by 600,000 b/d to 800,000 b/d. It is unclear how any changes to the three contracts, worth around $1 billion, might impact the project's timeline.