Saudis seek oil in Red Sea 'safe zone'
12/6/2012 5:06:19 PM
YANBU, Saudi Arabia, Dec. 6 (UPI) --
Saudi Arabia's state oil company Aramco has launched major seismic studies in the Red Sea off the kingdom's west coast, 1,000 miles from the dangers of the Persian Gulf, in a bid to boost its production levels from new offshore fields.
Aramco hasn't issued estimates of the Red Sea's energy potential but the Middle East Economic Digest reports that "it is anticipated there could be up to 100 billion barrels of oil reserves under the seabed.
"This is equal to a 38 percent increase on Saudi Arabia's current proven reserves of 267 billion barrels."
Development could cost up to $25 billion but the strategic gains for Riyadh are immense.
Aramco announced the discovery of an offshore gas field showing promising flows northwest of the Red Sea port of Duba, set to be the hub of the new exploration drive.
The Saudis "are confident the area has sufficient oil and gas deposits to sustain a massive development, including offshore platforms, pipelines and onshore processing and bunkering facilities," MEED reported.
The Saudis are only too well aware of predictions the U.S. shale oil boom will eventually turn America into the world's top producer, a position the kingdom has held for decades and is the source of its geopolitical power.
The vast U.S. shale oil deposits are expected to make the country a net exporter by 2020, ending a half-century of dependence on Persian Gulf oil. Industry analysts forecast that by 2017, the United States, dubbed "Saudi America," will overtake the kingdom's output of 10 million bpd.
These days, Saudi Arabia ships more oil to Asia, mainly China, than it does to the United States. Even if U.S. demand plummets, the expanding economies of China and India will ensure the kingdom's market won't shrink.
But the Saudis, and other gulf producers, are requiring ever-greater volumes of energy for their own industrial and population expansion, particular for electricity generation and desalination plants.
Indeed, MEED noted that Aramco's initial focus in Red Sea development will be on natural gas, rather than crude oil, for domestic consumption, that will free up more oil for export.
It's not clear to what degree the prospect of developing fresh fields and production outlets far from Iran, the kingdom's arch-rival which whom it's locked in a confrontation in the gulf, is behind the Red Sea exploration.
But the Saudis are ever-mindful that some of their eastern fields, which include the world's largest, are running down after more than 60 years' production while demand is growing in Asia.
Even so, the security aspect of the kingdom's all-important energy production was emphasized by Riyadh's Nov. 12 accusations of Iranian military intrusions into its territory near oil and gas fields in the gulf.
The Saudi newspaper Okaz reported that Riyadh has complained to U.N. Secretary-General Ban Ki-moon that Iranian helicopters had flown over the Hasba gas field several times in recent weeks.
It also reported that two Iranian navy gunboats had intercepted an Aramco vessel within Saudi territory as defined in a 1968 agreement with pre-revolutionary Tehran.
Iran, which lies on the gulf's eastern shore 150 miles from the kingdom's oil-rich Eastern province, responded by accusing the Saudis of conducting exploration work in prohibited border areas.
Saudi Arabia, where Islam was born 1,300 years ago, overwhelmingly adheres to the mainstream Sunni branch of Islam. Iran is predominantly Shiite, a radical offshoot sect. The sects have been locked in a bitter religious schism since the death of the Prophet Muhammad in the late seventh century.
In the current confrontation in the gulf, centered on Iran's nuclear program, the Saudis are backed by the United States.
Tehran has threatened to close the Strait of Hormuz, the only gateway to the gulf through which one-third of the world's oil supplies pass, if they're attacked.
That may not happen in the current face-off but if it does Saudi Arabia and the United Arab Emirates have developed pipelines to bypass the strait to carry oil exports. This, however, will total only about one-third of the 17 million bpd that transits Hormuz.
Having producing fields and infrastructure on the Red Sea will give Riyadh a new edge.
The Red Sea's much deeper than the gulf but Aramco says production could start as early as 2016.