September 07, 2008

Saudi oil investments pumps USD 100 billion in 40 years

According to the Saudi Arabian Monetary Agency figures, Saudi Arabia has pumped more than USD 100 billion into its oil sector over the last 40 years but the investments have largely been offset by crude sales which have fetched it more than USD 1.6 trillion.

The sales involved a total 79 billion barrels pumped out of Saudi’s giant oilfields since it began full crude exports in 1967. Theoretically, such a massive output could have depleted the Kingdom’s oil resources as it exceeded its proven oil reserves of 68 billion barrels in 1967. But the reserves have more than tripled to a record 264 billion barrels at the beginning of 2007 and experts attributed this surge to new major discoveries as well as the introduction of advanced drilling and production technology.

Mr Ihsan bu Hulaiga a Saudi economist said that “Saudi Arabia controls more than a quarter of the world’s oil deposits and officials believe there are lot more oil in deep layers and other unexplored areas in the Kingdom.”

SAMA figures showed the Kingdom has remained one of the world’s heaviest investors in the oil sector as such investments are needed to maintain its fields, expand output capacity and sustain the present capacity, hunt for more oil in unexplored areas, and develop its oil infrastructure. Between 1967 and 2007, Saudi’s oil investments totaled around SAR 382.7 billion. But experts said the capital does not include exploration activities, downstream projects and other sectors associated with production. Experts added that the bulk of those investments covered development of the oil fields to maintain and increase the production capacity.

In 1967, Saudi injected only SAR 2 billion into its oil sector but the investments rocketed to nearly SAR 12 billion six years later and to SAR 14 billion in 1995. They fluctuated in the following years before they climbed to a record SAR 26.4 billion in 2006 and are believed to have surpassed SAR 30 billion in 2007.

Saudi’s sustainable output capacity of around 11 million barrels per day, however, is far higher than that of Russia, which has a negligible spare capacity.

SAMA’s figures showed Saudi Arabia’s income from its oil exports has also been largely unstable over the past decades because of changing output and prices. It stood at only around SAR 39 billion in 1967 but jumped to SAR 114 billion 10 years later. It continued its rise to reach as high as SAR 328 billion during the oil boom of 1981. After sharp fluctuations in the following years, the Kingdom’s oil income soared to its highest ever nominal level of SAR 604 billion in 2006 and was projected to exceed SAR 640 billion in 2007. It put the cumulative Saudi oil export revenues during 1967-2007 at around SAR 6.25 trillion.