Five new upstream oil projects are planned over the next five years, Saudi Aramco's vice-president for new business development, Khaled al-Falih, said at an industry gathering in London. The projects involve the onshore fields of Khursaniya, Nuayyim and Abu Hadriyah and the offshore Manifa field. They had been earmarked for implementation in the early 1990s, but were put off because of budgetary constraints. Khursaniya, which was taken out of production in 1993, has a capacity of 150,000 barrels per day (bpd) of Arab Medium, of which 50,000 bpd is mothballed. Nuayyim ­ in central Saudi Arabia south of Riyadh ­ is one of the Najd fields which Saudi Arabia began bringing onstream in 1994. They include Hawtah, Hazmiyah, Ghinah and Umm Jurf. Nuayyim came onstream with limited capacity in January 1997, using facilities at the Hawtah field. The construction of a 75,000 bpd gas/oil separation plant (GOSP) at Nuayyim at a cost of $180 million ­ put off in 1995 ­ will boost the kingdom's Super Light capacity to 275,000 bpd. Plans to boost output at the offshore Manifa field by 300,000 bpd were deferred in the early 1990s. The field has 10 billion barrels of proven reserves. The field, which produces Arab Heavy crude, has a current capacity of 200,000 bpd. These projects entail the design and construction of more than 20 offshore platforms, several GOSPs, processing plants and about 2,300 kilometers of flow lines and long distance pipelines. By far the biggest project that oil engineering companies have been waiting for Saudi Aramco to tender is the $3.1 billion Khurais development, which will increase capacity from 100,000 bpd to 1.2 million bpd of Arab Medium by 2008. It is expected to be tendered in 2004 or 2005, although no concrete indications are available. It involves building six GOSPs. Khurais and Abu Hadriyah were mothballed in 1993, and plans to upgrade them were shelved. Saudi Aramco already has two large upstream oil developments in progress. It is spending some $1.6 billion to boost its capacity by 1.1 million bpd by 2005. An additional 800,000 bpd of Arab Light crude will come from expansions at the onshore Qatif field and the Haradh zone of the giant Ghawar field. And 300,000 bpd of Arab Medium will come from the offshore Abu Safah field. Saudi Aramco maintains that these upstream projects are aimed at keeping sustainable spare capacity at its current level, rather than boosting it: "The objective is to maintain the company's maximum sustained capacity and not to increase capacity beyond the current 2 million barrels (per day) of spare production capacity that Saudi Arabia has maintained for years," said Falih. This may mean the company will mothball other producing fields to rest their reservoirs once the new developments come onstream. Alternatively, they may be used to add new sustainable capacity if global demand has grown enough by the time they come onstream. The kingdom's real upstream growth is in gas, with the focus on exploration for non-associated gas. And unlike its upstream oil plans, which will be funded by Saudi oil revenues, the kingdom's new gas plans will be funded through foreign investment. It plans to award three 40-year gas concessions outside of Aramco's core area of operations to foreign companies in the first quarter. A fourth concession was awarded to a consortium led by Shell with Total and Saudi Aramco as partners in November. Foreign companies that win concessions in Saudi Arabia's upstream gas opening will pay a 20 percent royalty on the condensates they produce, but no royalty on gas output. Their returns will be progressively taxed at the rate of 30 percent until internal rates of return (IRR) reach 8 percent. As the IRR rises above 8 percent, the tax will gradually rise, reaching 85 per cent once an IRR of 22 percent on total capital is reached. The kingdom's internal gas sales price of 75 cents per million British thermal unit (BTU) will apply to the gas produced by the foreign companies, which will be for domestic use. These terms apply to three concessions with a total area of 120,000 square kilometers for which bids are due at the end of January. They also apply to a $2 billion concession won by a consortium led by Shell in partnership with Total and Saudi Aramco in November. All four concessions will run for 40 years. The three yet to be awarded include a minimum work program that involves, in each case, the drilling of at least two wells and seismic work covering 5,000 square kilometers. The Shell-led consortium will undertake three exploration periods, each lasting five years. Saudi Aramco believes there is much more non-associated gas to be found in the vast, under-explored desert of Al-Rub al-Khali. Only 15 percent of the kingdom's total prospective area has been covered by modern seismic activity. It estimates total gas reserves there at 260-300 trillion cubic feet. The kingdom has proven associated gas reserves of 138 trillion cubic feet and proven non-associated reserves of 93 trillion cubic feet. Saudi Arabia wants to boost its gas output quickly to fuel ambitious plans to expand its petrochemicals sector and to meet its burgeoning power generation needs. According to Falih, Saudi Arabia sees refining "as the second platform for growth after gas" in its industrial cities of Jubail on the Gulf coast and Yanbu on the Red Sea coast. Rising demand for products means that by 2005 "we will be on the high, uncomfortable end of refinery capacity utilization" and more will be needed, Falih said. "We see Saudi Arabia as the next center for a new wave of refineries to meet growing demand for products," he added. Saudi Arabia hit 2 million bpd refining capacity following the commissioning of a 200,000 bpd condensate splitter at the Ras Tanura refinery in August. It plans to export 820,000 bpd of products next year, said Falih. Ras Tanura now has a capacity of 500,000 bpd, including the splitter, which makes it the kingdom's largest refinery. Saudi Arabia has six refineries, including a joint venture with ExxonMobil and a joint venture with Shell. The kingdom announced a $4 billion plan last month to upgrade and transform its 18-year-old Red Sea coast 425,000 bpd Rabigh refinery into a giant petrochemical complex by 2008. The project, to be financed through private local and foreign investment, includes a new 1 million ton per year (t/yr) ethane cracker, which will boost olefin production to 1.7 million t/yr. Another project on the cards is a $533 million privately funded cogeneration program that will involve building, financing and operating four plants to generate over 1,000 MW of electric power and over 4 million pounds/hour of steam to power Saudi Aramco's oil and gas facilities. The projects are to be implemented by a joint venture yet to be established between a Saudi company and an international company, and will be transferred to Saudi Aramco after the expiration of the agreement's 20-year term. Implementation is expected to begin in the first half of 2004, with completion occurring in phases during 2006. Saudi Aramco will supply them with the gas and water needed to produce electricity and steam. According to Falih, Saudi Aramco's capital expenditures over the past decade have amounted to $34 billion. P.I.N//MENAFN