A satellite-enabled peek at Saudi oil.

Monday, September 30, 2013

Of Milk Cows and Saudi Arabia

Under the desert in eastern Saudi Arabia lies Ghawar, the largest oil field in the world. It has been famously productive, with a per-well flow rate of thousands of barrels per day, owing to a combination of efficient water injection, good rock permeability, and other factors. At its best, it set the standard for easy oil. The first wells were drilled with rather rudimentary equipment hauled across the desert sands, and the oil would flow out at ten thousand barrels per day. It was, in a sense, a giant udder. And the world milked it hard for awhile.

However, this article isn't just about a metaphor; it is also about cows, the Holsteins of Haradh. But in the end, I will circle back to the present and future of Saudi oil production.

In my Google Earth-enabled virtual travels around Saudi Arabia looking for oil wells and such, I have come upon many strange sights. Some of these are of natural origin yet can only be appreciated from a satellite's perspective, as is the case for this tidal pool located near a gas oil separation plant for the Safaniya oil field:
Figure 1. My favorite Google Earth view, near Safaniyah oil field, Saudi Arabia

There are many crop circles scattered about eastern Saudi Arabia -- by which I mean circles of crops watered by central pivot irrigation (as opposed to circles of crops flattened by aliens). A line of such circles cuts across the southern tip of the Ghawar field, seemingly following the course of a dry river bed.
Figure 2. Irrigation along the southern fringe of the Ghawar Oil Field, Saudi Arabia. Arrows indicate location of features of interest.
Located on this line, just to the west of the field periphery, are three rather symmetrical structures:

Figure 3. Symmetrical objects of interest near Ghawar oil field.

Each of these is about 250 meters in radius. It took me awhile to discover what these were, as at the time, crowdsourced mapping was just getting started. It so happens that they are part of a huge integrated dairy operation, one of the largest in the world. Fodder crops are grown in nearby circles, cows are milked with state of the art equipment, and the milk is packaged and/or processed into cheese and other products before being shipped. All of this happens in the northernmost fringe of the Rub' al Khali desert, one of the most inhospitable places on earth. Start here to browse around Saudi Arabia's Dairyland on your own using Google Maps.

Turning Black Gold Into White Milk

Here is a glossy PR video describing the operations:

Although the original intent was to locally breed cows more suited to the Saudi climate, it seems they had to import them. Here is another video describing the transport of cows from Australia. A bit different than a Texas cattle drive.

They Built It, But They Didn't Come

Answering why and how these dairy farms came to be located here reveals some interesting history of Saudi Arabia. Although great wealth of the country results from its abundant store of fossil fuels, the necessity of diversifying the economy has long been recognized. The lack of food security was always a big concern. In addition, there remained the nagging problem of what to do with the Bedouins, nomadic peoples who resisted efforts to be integrated into the broader Saudi society. And since they now had it in abundance, they decided to throw money at the problems. What could go wrong?

As related in the book "Inside the Mirage" by Thomas Lippman, a problem with Saudi agriculture is that most of the private land was owned by just a few people, and they were wealthy aristocrats, not farmers, and there wasn't much local knowledge of modern large-scale agriculture in any case. One of the proposed solutions was to create huge demonstration projects by which modern techniques of farming could be learned and applied. As for labor, the goal was to provide individual farms, housing, and modern conveniences to the Bedouin, who would settle down for a life on the farm. The largest such project was the al-Faysal Settlement Project at Haradh, designed for 1000 families. It didn't work out as planned, though, because the Bedouins never came:
You know of the Haradh project, where $20 million was spent irrigating a spot in the desert where an aquifer was found not too far from the surface. This project took six years to complete and was done for the purpose of settling Bedouin tribes. At the end of six years, no Bedouin turned up and the government had to consider how to use the most modern desert irrigation facility in the world.

(From a 1974 Ford Foundation memo)
Eventually, the Saudi government partnered with Masstock, a Dublin-based industrialized endeavor run by two brothers. The Haradh project became the largest of their operations in Saudi Arabia at the time. Eventually, a new company called Almarai (Arabic for "pasture") was created which involved Prince Sultan bin Mohammed bin Saud Al Kabeer. In 1981, a royal decree created the National Agricultural Development Company (NADEC) for the purpose of furthering agricultural independence, and (for reasons I haven't discerned), NADEC gained control of the Haradh project. Almarai went on the become the largest vertically integrated dairy company in the world, and Al Kabeer is a hidden billionaire.
As a side note, NADEC sued Saudi Aramco a few years ago as a result of the latter using some NADEC property for Haradh oil operations, and a lower court ordered Saudi Aramco to vacate. The web links to those reports have disappeared, and one wonders how the appeal went. Separately, NADEC has reportedly obtained farmland in Sudan. Food security.

Speaking of Cash Cows

A half decade ago, much of The Oil Drum's focus was on possible problems with Saudi Arabian oil production. Was the flow from Ghawar tanking? Were all of their older fields well past their prime, and were their future options as limited as Matt Simmons suggested in Twilight in the Desert? My analyses and those of others here seem to suggest a rather aggressive effort to stem decline. With further hindsight, it is clear that Saudi Aramco was caught a bit off guard by decline in existing production. But over time, they were able to complete several decline mitigation projects as well as many so-called mega-projects with many million barrels per day of new production. With each project, the technological sophistication has grown - along with the expense. The Khurais redevelopment, which is reportedly producing as expected, features centralized facilities for oil, gas, and injection water processing. Water goes out, and oil comes back.
Figure 4. Left: map showing Saudi oil fields, Right: Khurais Project pipeline network (source: Snowden's laptop)
The most recent project, the Manifa field redevelopment is a logistical marvel. These have so far proven to be very successful projects (even though Manifa is not fully completed). But if one looks for the impact of the projects on their total output, one comes back somewhat underwhelmed. In the following graphic I show Saudi Arabian production with the theoretical (zero depletion) and official (as reported directly by Saudi Aramco) production capacities.

Figure 5. Saudi Arabian crude oil production increases from megaprojects since 1996, compared with actual crude production (source: Stuart Staniford). Cumulative increases are superimposed on the Saudi Aramco reported baseline value of 10.5 mbpd capacity in 1995. Blue dots denote values obtained from references 1, 2, 3, 4, 5, 6
Here are some conclusions one might draw from the above (including the references):
  • Saudi Aramco has generally been self-consistent when reporting spare capacity and total capacity in light of actual production
  • Production capacity increased subsequent to startup of megaprojects. However, the net production capacity increases were uniformly and substantially less than the planned increments. In total, 5 million barrels per day of production was added, but capacity increased by only 2 mbpd.
  • It is most unlikely that reported production capacities accurately reflected what was producible at any point in time, given the reported values as correlated with the timing of the increases from the megaprojects.
  • However, actual production did not generally increase immediately after projects were completed, indicating that production capacity was not completely exhausted beforehand. But there was certainly an impetus to add a lot of production quickly.
The gap between what might have been (red staircase) and what is reported as production capacity (blue dots) is explained by considering the net of two competing developments: 1) depletion of legacy fields (Ghawar etc.) as they are produced, and b) mitigation of this depletion by drilling new wells in these fields. Since Saudi Aramco does not release data for individual fields or new vs. old wells, we are left to speculate on the relative magnitudes of these. On the plus side, the 5 mbpd from the new projects will (hopefully) deplete less rapidly than older fields. On the minus side, only 2 mbpd capacity was added - and they have exhausted all of the major fields in the pipeline. On the double minus side (for the world, anyway), only 1 - 1.5 mbpd of actual production was added since 1995, and (according to BP) all of that increase went into internal consumption. So after nearly 20 years, though total world crude production (and population) has increased, Saudi Arabia exports the same amount of oil as before. And yet, there is still a lot of hydrocarbons under Saudi Arabia. And it seems they already realize the need for more, as there are reports of planned increases from Khurais and Shaybah totaling 550 kbpd by 2017 to "take the strain off Ghawar". I feel its pain.
Addendum: According to this news report, oil has not actually flowed yet from Manifa. The new Jubail refinery has reportedly no received any Manifa oil as of yet:
The refinery is configured to run on heavy crude oil. But two industry sources said the refinery had not received any of the heavy crude expected from Aramco's new Manifa field and that it was running instead on light crude. Aramco said in April that it had started production at Manifa.-Reuters

Still the One?

Despite all of the negativity emitted above, it is also evident that Saudi Arabia has had and will continue to have a role as the primary provider of spare capacity which can be deployed to buffer variability in world demand. It can do this because Saudi Aramco, the largest oil company in the world, can effect oil prices by virtue of what it can put on or take off the world market. Contrast the Saudi production profile with that of the United States, shown below.
Figure 6. United States monthly crude oil production (source: EIA)
Aside from some minor month-to-month fluctuations and some notable downward spikes caused by Gulf of Mexico hurricanes in 2002 (Isadore), 2004 (Ivan), 2005 (Katrina and Rita), and 2008 (Gustav), production follows a smooth trend. Especially noteworthy is the contrast between Saudi and US production subsequent to the economic downturn in 2008, when oil prices collapsed: Saudi Arabia throttled back while the US kept pumping. Any individual producer in the US had little incentive to hold back oil. However, with the increased importance of Shale plays (Bakken and Eagle Ford) to US production, this might change the dynamics going forward. Since these wells deplete rapidly, any decrease in drilling caused by low prices will also throttle demand (although with a time lag).

The Hungry Cow

The other new "above ground factor" is the problem of growing internal consumption in Saudi Arabia, of just about everyting including oil. To air condition all of those cows, it takes a lot of electricity (and currently oil). And all of that milk feeds a growing, young population. But that milk is bound to get more expensive, since the aquifers from which those massive dairy operations get their water are being rapidly depleted.
Milk consumption in Saudi Arabia reached 729.4 million litres in 2012
The Kingdom has already depleted 70% of these sources of water and must now turn increasingly to desalinisation which when factored into the cost of producing fresh milk is very expensive. Experts have estimated that it takes between 500- 1000 litres of fresh water to produce 1 litre of fresh milk if one takes into around the irrigation required to grow the Rhodes grass or Alfalfa required to feed the cows.
It seems Saudi Arabia has cash flow problems, although it is hard to imagine why, given that they are currently producing as much oil as ever at $100/barrel. For one thing, their population keeps growing:
Figure 7. Saudi Arabia population growth (source: Thanks, Jonathan!)
and they need to spread around some money to maintain political stability. Their energy use is out of control, as is their water consumption. And for those segments of Saudi society into which much of the oil revenue flows, consumption is a happening thing. And nobody really knows where the all money goes.
Saudi Aramco is overseen by the Petroleum and Mineral Resources Ministry and, to a lesser extent, the Supreme Petroleum Council, an executive body. The company pays royalties and dividends to the state and supplies domestic refineries. Revenues go to the Finance Ministry, but the amounts are not published. There is no transparency in the national budgeting process, and it is unclear how oil revenues are used. Environmental impact assessments are required, but the results are not made public. Laws and decrees concerning the extractive industries are published and include guidelines for the licensing process in sectors other than upstream oil, but do not contain details on fiscal arrangements. Saudi Arabia has no freedom of information law.

Some ends up in London, where some Saudi tourists spend the entire summer. Of course, this was true in 2002 (and oil was $26/barrel then).
But they do seem to have money to throw around to garner political influence (note that the US does the same with money that it doesn't have). And they have grand plans for looking beyond their petro-heritage:

Thursday, March 22, 2012

From Qurayyah to Khurais: Turning Water Into Oil

Synopsis: A poignant little film about someone taking a lot of precious seawater, piping it miles into a parched desert, and forcing it into the ground. Oh, and then poking a bunch of holes in said ground and collecting the ooze that comes out. And separating said ooze into crude oil, bad smelling gas, and assorted other liquids with a whole lot of fancy plumbing. A bit slow occasionally, but this, plus a strange score choice ("Nomads of the Tibetan High Plateau"), forces the viewer to ponder the meaning of it all. In 3D animation.

Shorter synopsis: This video is an animated flyover of the Khurais Crude Increment Program in Saudi Arabia. Interesting stuff about oil production.
OK, so this is more of an educational film. But by watching, you will learn the following:

  • How crude oil straight out of the ground is processed prior to being shipped around the world.
  • How Saudi Aramco takes seawater from the coast, treats it, transports it, and injects it into the ground, thus helping to force the oil to the surface.
  • A few interesting tidbits about the Khurais and Ghawar oil fields.
  • How to correctly pronounce several Saudi Arabian oil place names.
The video is an animated flyover of the Khurais Crude Increment Program, which was completed in 2009. I reported on Khurais prior to its completion. The fields of Khurais, Abu Jifan, and Mazalij together now have a reported capacity of 1.2 million barrels of oil production per day. This project required drilling new production wells plus peripheral water injection wells. Water for the injection is pumped via pipeline from the Arabian Gulf, specifically from the Qurayyah Seawater Treatment Plant, which is also used to provide water for injection into the Ghawar field. Some of the new capacity of Qurayyah was slated for Ghawar. The video covers upgrades made at Quarayyah and Ghawar as part of the Khurais project, as well as showing the workings of the Khurais Central Processing Facility.

Well, enough with the spoilers. Watch the video. There will be a quiz afterwards.

Part 1:  Khurais Central Processing Facility

Part 2: From Qurayyah to Ghawar and Khurais

Supplemental Information and Observations

Location of Facilities

Shown below are the locations of the various facilities and pipelines discussed in the video. The 'Ain Dar Water Injection Plant actually appears to be located in the Shedgum area of Ghawar. The Haradh WIP is located adjacent to Haradh GOSP-2. The new pipelines were generally laid next to existing pipelines, and the new pipeline from 'Ain Dar to Khurais follows the E-W Crude Pipeline that runs between Abqaiq and Yanbu on the Red Sea.

Khurais and Ghawar seawater injection feeder pipelines from Qurayyah Seawater Treatment Plant on the Arabian Gulf coast.

Khurais Central Processing Facility

The Khurais project is novel for Saudi Arabia in that nearly all of the processing happens in a central location. Instead of having gas-oil separation plants scattered around the field, they are located next to each other and connected in parallel. This arrangement is enabled by the fact that all of the Khurais producing wells employ downhole submersible pumps, helping to push the oil from each well to the Khurais Central Processing Facility located up to 100 kilometers away.

Various components within the Khurais Central Processing Facility identified.

Qurayyah Seawater Treatment Plant

Below is a Google Earth view of the Qurayyah plant in 2010. The upgrades are in the south (toward screen bottom) end, and the two added pipelines (QUAD-2 and QUU-4) supplement the four existing prior to the Khurais project. Before 1974, the Qurayyah site was a sandy, remote beach. By 1978, it was supplying Ghawar with 4.2 million barrels of seawater for injection. Check it out on Google Maps and note the security around the perimeter.

Satellite view of the Qurayyah Seawater Treatment Plant. The two new pipelines are QUU-4 and QUAD-2.

Peripheral Water Injection Explained

Below is an animation (repeated from here) showing how peripheral water injection is used to help get the oil out of a reservoir.

Visual model of peripheral water injection into an oil reservoir. Note that Khurais producers are (reportedly) all horizontal wells.

Production and Water Cut in Ghawar and Khurais

The amount of water being injected into Ghawar has been of interest on this blog for many years. The video threw a lot of numbers out there regarding how much water the upgraded system can deliver, but it is not always clear when the upgrades alone or the total system are being referred to. But it seems we have the following:

  1. 2.36 MMBD (million barrels per day) of new water supply is arriving at the Uthmaniyah facility via the new QUU-4 pipeline, adding to that supplied by the three existing lines (QUU-1, QUU-2, and QUU-3)
  2. A total of 2.52 MMBD of water is being (or can be) injected into the Hawiyah area of Ghawar at 2820 psi. The oil production capacity of this area has not been specified, but it has been assumed to be about 1 MMBD.
  3. A total of 1.99 MMBD of water is being (or can be) injected into the Haradh area of Ghawar in 135 injectors, also at 2820 psi. The oil production capacity of this area has been stated to be 0.9 MMBD. The figure of 135 water injectors, if true, would mean about 25 more injectors have been added over the last few years, based on previous counts in satellite images that I have done.
  4. At about 17:00 into the video, it is stated that the water is injected into Haradh at 2500 psi and that the yield is 1.6 barrels oil for every barrel water. That pressure figure (at least) seems to be a mistake, as it is inconsistent with the above values (which are in turn consistent with the Ghawar field operational pressure for many years). The 1.6 ratio is certainly not consistent with the assumed production capacities and the amount of water. The same figures are repeated later after discussing injection into Khurais, and it becomes clear that these apply to Khurais and not to Ghawar, as 2500 psi is sufficient to pressurize Khurais. Perhaps the video has not been edited for final release to theaters.
  5. The QUAD-2 pipeline is delivering 2.14 MMBD to the 'Ain Dar Water Injection Plant and on to Khuais.
Certainly an unknown quantity is the amount of produced water (from the oil wells) being fed back into the system for reinjection in Ghawar. At 9:26 in the video, a figure of 636 thousand barrels per day of water is given for Khurais. This might be the current capacity for this, but Saudi Aramco recently said:

KHURAIS, the single largest addition to oil capacity in Saudi Aramco’s history, is now producing around 1 million barrels per day (mbpd), field production manager Yousef Al Furaidan says.
On the other hand, Al Furaidan says it can pump far above nominal capacity. “We can produce up to 1.4 mbpd because this field is considered a virgin field, still at the beginning of its production life,” he said. The facilities can handle the higher production levels as they are designed to deal with a 30 per cent water cut, while the water cut now is virtually zero, he says.
30 percent of 1.2 million is only 360k, so there is an inconsistency somewhere. That report also said this:

Decisions about managing spare capacity at Aramco fields are in the hands of reservoir engineers, but at Khurais, the state oil giant always tries to maximise output from the main field, Al Furaidan says. The two satellite fields, Abu Jifan and Mazalij, together produce 160,000 bpd. They have higher production costs than Khurais, and will be kept idle if not required, industry sources say.
And regarding gas and NGL production, there was:

According to data from the central processing centre, Khurais was exporting 31,900 bpd of natural gas liquids. It was also producing 290 million cubic feet per day (mmcfd) of gas, although Al Furaidan says it can reach 330 mmcfd at full stretch.
Raw gas production is proportionally lower, but NGL production is rather low (80k expected for 1.2 MMBPD oil) Where are those liquids going? It is possible that (much) more NGL comes from Abu Jifan and Mazalij such that when they are shut in, overall NGL production declines substantially.

Bottom Line

It gets a bit old watching fluids flow through pipelines, but there were some nice touches, such as the worker at Qurayyah turning pages and the sea critters in the Gulf. One thing missing from the story was what goes on in Khurais in between the water injection and the wet crude processing. Saudi Aramco has yet to reveal how the field is laid out. So I will -- in a future post.

Oh yeah, the quiz! Question: how many seahorses were in the video?

Wednesday, February 9, 2011

Much Ado About a Wikileak

It seems some Saudi diplomatic missives have turned up in the trove of documents that is Wikileaks, and there are claims that Sadad al-Husseini, a former Vice President of Saudi Aramco, was heard dissing the prospects of his former employer. But if you actually read the relevant wikileak, it becomes clear that the Guardian journalist misinterpreted the wikileaked cable -- which perhaps misquoted Al-Husseini.
Al-Husseini disagrees with this analysis, as he believes that Aramco's reserves are overstated by as much as 300 billion bbls of "speculative resources." He instead focuses on original proven reserves, oil that has already been produced or which is available for exploitation based on current technology. All parties estimate this amount to be approximately 360 billion bbls. In al-Husseini's view, once 50 percent depletion of original proven reserves has been reached and the 180 billion bbls threshold crossed, a slow but steady output decline will ensue and no amount of effort will be able to stop it. By al-Husseini's calculations, approximately 116 billion barrels of oil have been produced by Saudi Arabia, meaning only 64 billion barrels remain before reaching this crucial point of inflection. At 12 million b/d production, this inflection point will arrive in 14 years. Thus, while Aramco will likely be able to surpass 12 million b/d in the next decade, soon after reaching that threshold the company will have to expend maximum effort to simply fend off impending output declines. Al-Husseini believes that what will result is a plateau in total output that will last approximately 15 years, followed by decreasing output.

It's clear to me that he is just disputing the notion that Saudi has 700+ billion barrels of "reserves" claimed by the other SA talking head:

Abdallah al-Saif, current Aramco Senior Vice President for Exploration and Production, reported that Aramco has 716 billion barrels (bbls) of total reserves, of which 51 percent are recoverable.

The only thing of real interest here is that Al-Husseini distanced himself from "peak oil" while seeming to agree with it. But is was only a matter of time before someone would ask al-Husseini to confirm his views on this, and he indeed claims that he was misinterpreted.
He says he has no dispute with Aramco’s official reserves data, but disagrees with Mr. al-Saif’s projection for the future and with the diplomats’ characterization of its existing 716 billion barrels as “reserves”.

In fact, he says, that figure refers to “oil in place” which includes both recoverable and non-recoverable oil.

The kingdom’s “proven reserves”, the oil Saudi Aramco believes it can extract, are officially given as 260 billion barrels (Mr. al-Saif said the actual figure was probably more like 51% of the “oil in place” –- around 358 billion barrels).

Mr. al-Husseini says he has no problem with either Saudi Aramco’s official figures on current proven reserves or Mr. al-Saif’s estimate, but was simply making the point that to describe “oil in place” as reserves was to inflate the kingdom’s figures by several hundred billion barrels.

There is still much to be skeptical about with regards to the proven reserves of Saudi Arabia, and I am one of many who have questioned the claims of Saudi Aramco in light of their actions. For example, they always magically seem to "discover" as much oil as they produce each year such that their reserves never decrease. However, there is no bombshell in this particular wikileak in terms of how much oil they have left.