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Saudi Seen Reaping Record Oil Revenues in 2006 | ASHARQ AL-AWSAT English Archive 2005 -2017
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DUBAI (Reuters) – Saudi Arabia is expected to earn record oil revenues of nearly $160 billion this year, helping the world’s top oil exporter fast-track ambitious plans to expand its energy sector, economists say.

High oil prices have filled state coffers with petrodollars and given Saudi Arabia budget surpluses for three years running, after two decades of low prices left the government in the red.

Simon Williams of the Economist Intelligence Unit said the kingdom made an estimated $154 billion from oil sales in 2005 and that a small pick-up was expected in 2006 for oil export revenues to reach around $160 billion.

“They were record oil revenues, certainly for 2005, which were about double the average of the previous five years,” he said.

Williams said the 2006 revenue figure was based on an average price of just over $60 for London Brent crude with Saudi oil output of around 9.6 million barrels per day (bpd).

Al-Rajhi bank, in a recent report, put Saudi oil exports at $157 billion in 2005 and forecast $155 billion for 2006.

Explosive demand growth in Asia and the United States sparked a four-year price rally and pushed oil above $60, prompting consumer governments to pile pressure on major oil producers to inflate the global supply cushion.

Saudi Arabia, OPEC’s largest producer which holds the bulk of the cartel’s spare capacity, has launched a $50 billion plan to boost its production capacity to 12.5 million bpd by 2009 and maintain spare capacity of at least 1.5 million bpd.

The kingdom last week launched two multi-million-dollar upstream and downstream developments, part of the plan to raise crude production and refining capacity.

“They are in a very comfortable position with a lot of cash,” said Brad Bourland, chief economist at Samba Financial Group, predicting oil revenues of some $160 billion for 2006.

“Aramco’s capital expenditure budget has been bigger in recent years and that is likely to continue.”

State oil firm Saudi Aramco has a separate budget for its operations than the state budget set by the finance ministry.

The government, which usually bases its budget on a conservative oil price forecast, has said its 2005 budget surplus would double to a record 214 billion riyals ($57 billion). It predicted a 2006 surplus of 55 billion riyals.

According to a recent report by Saudi National Security Assessment Project, Aramco is expected to spend $13 billion on its production capacity expansion plans to 2009.

Last week, the kingdom officially opened its $850 million Haradh oilfield project, five months ahead of schedule, to add 300,000 bpd of crude and raise its capacity to 11.3 million bpd.

Oil Minister Ali al-Naimi said the cost of the new Haradh plant was $2,600 for each barrel of capacity for the project’s life, compared with $10,000-$30,000 in the North Sea, West Africa or Gulf of Mexico.

“The thing you need to compare is what does it cost another producer who is competing with you in the market and what is your margin. I think we have one of the better, if not the best, margins worldwide in our activities,” he said.

Aramco has also speeded up its Khurais development project to add 1.2 million bpd by June 2009 in what Naimi called “one of the largest, if not the largest, increments to be brought on by any one single company in the world.”

It has started work on a $10 billion refinery and petrochemical complex and plans to build two new export-oriented refineries expected to cost between $4-$5 billion each.