Aramco Increases Production in Offshore Fields

An Aramco employee walks near an oil tank at Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. (File Photo: Reuters)
An Aramco employee walks near an oil tank at Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. (File Photo: Reuters)
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Aramco Increases Production in Offshore Fields

An Aramco employee walks near an oil tank at Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. (File Photo: Reuters)
An Aramco employee walks near an oil tank at Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. (File Photo: Reuters)

Saudi Aramco has pressed ahead with plans to increase production from offshore fields to maintain its capacity of producing 12 million bpd in the coming years.

The company has set a $300 billion budget for oil and gas projects in the next 10 years.

On Tuesday, Aramco said it awarded a contract to China Harbour Engineering Arabia for the construction of two drilling islands under the company’s Berri Increment Program (BIP).

The objective of the BIP is to produce an additional 250,000 barrels per day (bpd) of Arabian Light crude oil from the Berri Oil Field to reach 500,000 bpd to maintain Aramco’s maximum sustained capacity by early 2023.

Last week, Aramco awarded the first large-scope integrated services contract for its Marjan oilfield to GE’s Baker Hughes.

Baker Hughes will provide drilling services, coiled tubing services and drilling fluids engineering services in Marjan, which is the first of three major offshore expansions in Saudi Arabia, and the company’s largest upstream development project this year.

Aramco has announced in its annual report that it restored one of the units at Zuluf field, which had been shut down for 23 years. This would help the field maintain an 800,000 bpd production.

The annual report also indicated that Dammam field will begin producing 25,000 bpd in 2021, which will be increased to 75,000 in 2026.

On Tuesday, Aramco signed a contract with China Harbour Engineering in Dhahran.

The Program includes the installation of a new Gas Oil Separation Plant (GOSP) in Abu Ali Island and additional gas processing facilities at the Khursaniyah Gas Plant (KGP) to process 40,000 bpd of hydrocarbon condensate associated with the Berri Crude Increment. Related pipelines, water injection facilities, onshore drilling sites, drilling islands and offshore facilities are also included.

Under the contract, two drilling islands shall be constructed near shore at the north and south sides of the King Fahad Industrial Port (KFIP) causeway in Jubail, to support the Berri field production capacity islands.

The two drill sites referred to as Site A and Site B will have an approximate overall area of 616,553 square meters and 263,855 square meters respectively.

At least three North Asian buyers will receive extra supplies of Saudi oil after the kingdom cut its prices for most grades in October and as they look to cushion the impact on supply of US sanctions on Iran, sources told Reuters.

Buyers have asked to lift more Saudi oil than contracted volumes in October amid fears that the sanctions will crimp supply during peak winter demand in Asia, the sources said.

The sources, who preferred to remain anonymous as they are not authorized to speak to the media, indicated that Aramco will supply more oil to the buyers in October, with one to receive more Arab Light crude.

Washington has asked buyers of Iranian oil to cut imports to zero in the run up to early November to force Tehran to negotiate a new nuclear agreement and to limit its influence in the Middle East.

Increase in Brent price has also made European and African oil more expensive for Asian refiners, while the US-China trade war has sharply reduced China’s oil imports from the United States.

However, last week, Aramco cut its official selling prices for most of the crude grades it sells to Asia in October, making Saudi oil competitive.

Saudi Arabia, the world’s top crude oil exporter, and other producers from the Middle East and Russia have increased exports after a June meeting where they agreed to raise output by 1 million bpd. The rise in supply is to replace falling exports from Venezuela and Iran.



Venezuela Depreciation Risks Reversing Years of Inflation Gains

People walk through a market in the low-income Petare neighborhood, in Caracas, Venezuela November 16, 2024. (Reuters)
People walk through a market in the low-income Petare neighborhood, in Caracas, Venezuela November 16, 2024. (Reuters)
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Venezuela Depreciation Risks Reversing Years of Inflation Gains

People walk through a market in the low-income Petare neighborhood, in Caracas, Venezuela November 16, 2024. (Reuters)
People walk through a market in the low-income Petare neighborhood, in Caracas, Venezuela November 16, 2024. (Reuters)

Currency depreciation is set to reverse years of declining inflation in economically beleaguered Venezuela, public and private sector sources say, as foreign currency sales fall short of demand and the socialist government keeps tight-lipped about its strategy.

After years of hyperinflation and amid broad US sanctions, in 2022 the administration of President Nicolas Maduro began using orthodox policies including credit restrictions, lower public spending, a fixed dollar-bolivar rate and central bank sales of billions of dollars in foreign currency to tamp down consumer prices.

Maduro, who will begin his third term in January after a disputed election that the opposition and international observers say he lost, has said his government defeated inflation of more than 100,000% and prices in 2024 are similar to those in 2014.

But the administration's policy has now changed.

After more than nine months of the exchange rate being held at 36.5 bolivars to the dollar, the government in mid-October allowed the currency to float, beginning a depreciation that has seen the bolivar slide to about 45 versus the dollar, according to central bank figures.

Analysts say the over-valued currency made imports cheaper than locally-produced goods, impacting Venezuela's private sector and helping push prices up by 12% in nine months.

The untethering of the exchange rate will also put upward pressure on prices in the final quarter of 2024, financial and business sources said, with analysts predicting in a LatinFocus survey the rate will end the year at 50 bolivars to the dollar.

Year-on-year inflation was 25% through September. Official figures for October have not yet been released.

"For nine months the depreciation of the currency was zero while inflation was rising, which exposed problems in the exchange scheme," said economics professor and consultant Daniel Cadenas, who added the market depends on oil income. "For the system to function, there needs to be a growing source of exchange and that's not possible."

The government had predicted internally that inflation would close the year at 30%, two sources with knowledge of the projection said, but depreciation could increase the figure and local analysts have estimated inflation between 35% and 40%.

"There has been a necessary adjustment in the exchange rate that will have an impact on inflation," said Asdrubal Oliveros, head of local think tank Ecoanalitica. "The government has understood it needs to devaluate."

REDUCED CENTRAL BANK SALES

Vice President Delcy Rodriguez, who until recently also served as finance minister, told an event with business people last month that there must be "reflection" about the use of foreign exchange.

"We should all be concerned with how foreign exchange is used in imports. It is a subject the Finance Ministry is reviewing," she said. "We need to take care of foreign exchange because this is a blockaded country and there cannot be cheap exchange for hair dye."

Rodriguez's comments are the only ones made on the subject by the government since devaluation began. Neither the central bank nor the communications or finance ministries responded to requests for comment.

Private sector demand for cheap foreign exchange increased during the nine months the rate was held, even as the quantity of dollars being injected into the market by the central bank was reduced, sources said.

In July the bank was offering some $800 million, but by October that figure had fallen to $400 million, according to calculations by local consultancy Sintesis Financiera.

The central bank did not respond to a question about the reduction.

"The strategy in exchange policy is not going ahead," a government source said, without giving further details.

Food and medicine companies in Venezuela are allowed to pay for some of their goods with foreign currency, while other companies are given central bank promissory notes indexed to a specific exchange rate.

Two private sector sources said many businesses are eating through their inventories in the face of import difficulties.