The oil megaprojects obsession

Jodie Humphries

In the Middle East, megaprojects are a common occurrence. From grandiose hotels to jaw-dropping shopping malls, their sheer magnificence are the jewel in the region's construction crown. But the Middle East's love for the excessive goes far beyond traditional boundaries and deep into the heart of the region: oil. And so comes the birth of the oil megaprojects obsession.

A megaproject is defined as something done on a large scale, with an investment in excess of US$1 billion used to achieve the desired goal. At the end of October, Middle East Online revealed that Kuwait is to spend US$63 billion on megaprojects over the next four years. The price will be spread over a massive 250 projects.

Though no projects were named at the time, Kuwait, awash with cash from oil revenues, has been planning a new business hub dubbed Silk City as well as a new modern harbour, a railway and metro system. The ambitious plan, which runs from the current 2009/2010 fiscal year until 2012/2013, will focus on boosting the private sector's role in the domestic economy.

In fact, while OPEC's fourth largest producer sits on about 10 percent of global oil reserves and pumps about 2.2 million barrels per day, most oil producing nations are now investing their oil wealth in campaigns to diversify their economies, preparing for the day when diminishing oil reserves will require other growth engines, such as technology or services. Oil producing countries are also earmarking billions to expand their production and refining capacity.

Drilling platforms

For instance, the Kuwait Oil Company is currently undertaking the challenging oil megaproject of constructing 27 drilling platforms over the next 10 years. With estimated costs of US$7.2 billion and a targeted completion date of 2020, the aim is to ramp up oil and gas production in the Gulf state by one million barrels per day.

The 10-year plan will see Kuwait increasing the number of platforms from the current level of 25 up to 60 by 2011 and oil production rise from three million barrels per day to four million barrels per day by 2020.

Talks are currently ongoing for potential bidders on this project.

Oil fields

Saudi Aramco is also well-known for its oil megaprojects. Currently one of its largest projects is the Khurais oilfield in Saudi Arabia, on which construction started in 2006 with the aim of increasing production from 11.3 million barrels per day to 12.5 million barrels per day by 2009. TheKhurais project as a whole covers three oil fields: Khurais, Abu Jifan and Mazalij, at an estimated cost of US$10 billion.

In 2009, the project is expected to add 1.2 million bpd of high-quality Arabian light crude to Saudi Arabia's export capacity. The Khurais program will also increase the capacity of the Qurayyah seawater injection system by 4.5 million barrels per day of treated water for injection at Khurais and South Ghawar fields.

The drilling was completed in February 2009, 10 months ahead of the actually scheduled three year duration. Production at the oil field began in June.

To put Saudi Aramco's US$10 billion Khurais oilfield project into perspective, the three fields involved in this huge venture, Khurais, Abu Jifan and Mazalij, hold 27 billion barrels of oil. This is more oil than the all of the proved reserves of the United States.

But with megaprojects bringing unprecedented levels of growth to region, oil megaprojects are just the tip of the iceberg for the Middle East.