State oil firm Saudi Aramco will keep spending on oil and gas projects within the kingdom through 2014 at about $60 billion, a newspaper reported on Wednesday, quoting a contractor in business with the company.
The top oil exporter’s five-year plan would be $10 billion cheaper than the last plan coming to completion in June.
“Saudi Aramco has informed its large local contractors and agents of global firms that it had allocated a budget reaching $60 billion … to carry out oil and gas projects of various sizes up to 2014,” al-Watan newspaper reported, citing one of Aramco’s large contractors.
Saudi Oil Minister Ali al-Naimi declined to give financial details for the 5-year investment plan.”That is proprietary information,” he told reporters at a conference in Vienna. “We have said we will stay the course (on investment) and we will stay the course.”
Naimi reiterated that the kingdom would invest in boosting oil capacity when needed. Saudi Arabia has not made public further plans to boost capacity beyond a programme ending this year to take it to 12.5 million barrels per day, but it has outlined how it could reach 15 million bpd in the future.
Saudi Arabia has a long-held policy to keep 1.5 million to 2.0 million bpd to meet any surprise outages in the global oil supplies.
When the kingdom completes expansion plans, it will have over double the capacity cushion it likes to keep. Output stands just below 8 million bpd.
“We will be idling with 4.5 million bpd of spare capacity. That is a lot of spare capacity. So we will be investing when we need it,” Naimi said.
State oil firm Saudi Aramco also declined to comment on the Watan report on Wednesday.
Aramco is looking to force down new project costs to take advantage of cheaper prices for raw materials due to the global economic downturn. The firm met contractors earlier this month to discuss bringing down costs.
“We are looking to trim costs on projects,” an industry insider told Reuters. “But that is it. This is not a lower investment number due to any project cancellations or anything like that.”
The kingdom is spending billions more on international joint ventures.
Turmoil in world credit markets and tumbling oil prices have prompted energy companies globally to review their more expensive projects or cut back on spending to preserve liquidity.
Aramco has laid out plans for 144 projects until 2014, including eight “giant” projects it announced earlier this month, without giving a timetable.
Last week ConocoPhillips said that the refiner would likely make an investment decision on its new Yanbu joint venture refinery in Saudi Arabia in early 2010.
Conoco and Aramco halted bidding on the construction of the planned 400,000 barrel per day (bpd) Yanbu refinery in November, citing uncertainties in the financial markets.
Conoco said the delay on the project would likely help drive down its construction costs, which had soared to around $12 billion as oil prices ran up to a record $147 a barrel in July 2008. Those costs had been estimated in 2006 at about $6 billion.