According to the Oil and Gas Journal, Saudi Arabia contains approximately 267 billion barrels of proven oil reserves (including 2.5 billion barrels in the Saudi-Kuwaiti shared "Neutral" Zone), amounting to around one-fifth of proven, conventional world oil reserves. Around two-thirds of Saudi reserves are considered "light," "extra light" or “super light” grades of oil, with the rest either "medium" or "heavy." Although Saudi Arabia has around 100 major oil and gas fields (and more than 1,500 wells), over half of its oil reserves are contained in only eight fields, including the giant 1260-square mile Ghawar (the world's largest oil field, with estimated remaining reserves of 70 billion barrels) and Safaniya, including Khafji and Hout (the world's largest offshore oilfield, with estimated reserves of 20 billion barrels).

Saudi Arabia maintains the world’s largest crude oil production capacity, estimated to be around 10.5 - 11 million bbl/d, at mid-year 2008. In 2005, Saudi Arabia’s Ministry of Petroleum and Mineral Resources announced the details of a plan to increase this capacity to 12.5 million bbl/d by 2009, the detail of which are outlined below.

For 2007, the U.S. Energy Information Administration (EIA) estimates that Saudi Arabia produced on average 10.2 million bbl/d of total oil, comprising crude oil, lease condensate, natural gas liquids, and other liquids (including half of the Saudi-Kuwaiti Neutral Zone's 600,000 bbl/d). In addition to 8.7 million bbl/d of crude oil, Saudi Arabia produced around 1.5 million bbl/d of natural gas liquids (NGLs) and other liquids, which are not subject to OPEC quotas. Saudi Arabia, a leading world producer of NGLs, has experienced a rise in demand for NGLs from developing countries, including India (the leading export destination), where is it used for cooking and transportation. In the first and second quarters of 2008, Saudi Arabia’s production rose to an estimated 9.2 million bbl/d of crude oil, representing approximately 13 percent of total world crude production.

In response to historically high oil prices and rising demand, in June 2008, the Ministry of Petroleum and Mineral Resources announced that Saudi Arabia would increase production to around 9.7 million bbl/d in July 2008. As a result, Saudi Arabia will be producing at the highest level of crude since the early 1980s. The new capacity is expected to come primarily from the Khursaniyah development.

Saudi’s main producing fields include:

Source: Saudi Aramco

Saudi Arabia produces a range of crude oils, from heavy to super light. Of Saudi Arabia's total oil production capacity, about 65 to 70 percent is considered light gravity, with the rest either medium or heavy; the country is moving to reduce the share of the latter two grades. Lighter grades generally are produced onshore, while medium and heavy grades come mainly from offshore fields. Most Saudi oil production, except for "extra light" and "super light," is considered "sour," containing relatively high levels of sulfur.

In 2007, Saudi Arabia consumed approximately 2.3 million bbl/d of oil, up 50 percent since 2000, due to strong economic and industrial growth and subsidized prices. According to independent analysis quoted in industry reports, demand is expected to rise by eight to 10 percent through 2010, mostly in the area of electricity and NGLs for petrochemical production. In order to free up petroleum for export, Saudi Arabia continues to explore for natural gas resources throughout the country. Saudi Arabia is the largest oil consuming nation in the Middle East.

Saudi Arabia's long-term goal is to further develop its lighter crude reserves including the Shaybah field, located in the remote Empty Quarter (Rub al-Khali) area bordering the United Arab Emirates, the Abu Hadriya, Fadhili and Khursaniya (AFK) fields and the super giant Khurais. Although the Ministry has only committed to increasing capacity to 12.5 million bbl/d by 2009, potential increases to 15 million bbl/d capacity (post-2011) were discussed at a summit in Jeddah in June 2008.

Saudi Aramco continues aggressive plans to increase crude oil production capacity despite some recent delays; the following is a table of planed production capacity increases through 2011 (timetable as announced by Saudi Aramco).

In addition to these planned capacity increases, Saudi Aramco has stated that it will also conduct additional drilling at existing fields in order to help compensate for the natural declines from the mature fields. In April 2008, Saudi Aramco also announced a five-year plan beginning in 2009, to rapidly increase drilling exploration and investment in the oil sector. The plan includes increasing planned drilling by a third, to around 250 wells, with a priority in offshore area. However, increases in capacity development beyond the announced remain uncertain. Saudi Arabia’s Minister of Oil, Ali al-Naimi said in April 2008, that the “country was confident that it had enough oil to meet expected demand for another 50 years.”

In 2007, the Saudi Aramco Annual Review reported new oil discoveries at Mabruk and Dirwazah, in the Eastern Province. The Mabruk-1 well, the first discovery in the Hadriya reservoir south of Ghawar, produced 5,600 bbl/d of Arabian Heavy with 2 Mcf/d of natural gas. The Dirwazah-1 well produced approximately 5,569 bpd of Arabian Light) with 2.8 million Mcf/d of gas.

One challenge the Saudis face in achieving their strategic vision to add production capacity is that their existing fields experience, reportedly on average, 6 to 8 percent annual "decline rates” (as reported by PlattsOilgram in 2006) in existing fields, meaning that the country needs around 700,000 bbl/d in additional capacity each year just to compensate for natural decline. Decline estimates for Saudi Arabia vary widely, however. The Ministry of Petroleum maintains that decline rates in Saudi Arabia are around 2 percent annually.

Saudi Aramco, Saudi Arabia’s national oil company, estimates that the average total depletion for Saudi oil fields is 29 percent, with Abqaiq (the oldest) 74 percent depleted, the giant Ghawar field having produced 48 percent of its proven reserves and the younger Shaybah, just 5 percent depleted. Aramco also contends that Saudi oil reserves are likely underestimated, not overestimated, although some analysts have disputed Aramco's optimistic assessments of Saudi oil reserves and future production. Minister Al-Naimi has refuted these contrarian arguments, and stated that Saudi Arabia could add as much as 200 billion barrels of oil to proven reserves after the extended period of investment and exploration. In order to stave off decline, wells are undergoing reservoir management and rehabilitation projects, including the installation of SmartWell® technologies.

The Saudi-Kuwait Divided Zone or the “Neutral Zone”, 2230 square miles between the borders of Saudi Arabia and Kuwait that was left undefined in 1922, contains an estimated 5 billion barrels of proven oil reserves, shared between the two countries, from which approximately 600,000 bbl/d was produced in 2007. (See map)

In February 2008, The Kuwait Gulf Oil Company announced that the two countries were set to increase capacity in the Divided Zone to about 630,000 bbl/d by 2009. The increases are expected to come from the offshore area where steam injection technology will be employed.

Within the Neutral Zone, Japan's Arabian Oil Co. (AOC) traditionally operated the two offshore fields of Khafji and Hout with 300,000 bbl/d in production (approximately 150,000 bbl/d in 2007), but in February 2000, AOC lost the concession. Efforts to negotiate an extension of the operating contract with Saudi authorities failed when Japan refused to commit to investment in development projects desired by the Saudis, and Aramco took over operation of the former AOC fields (in January 2003, AOC reached an agreement with Kuwait on the right to purchase at least 100,000 bbl/d of crude for the next 20 years from Khafji). ChevronTexaco operates three onshore fields (Wafra, Humma, and South Umm Gudair) in the Divided Zone under a 60-year license that was renewed in July 2008. These fields have 2 billion barrels of proven reserves and total production of about 260,000 bbl/d of Arab Heavy oil. Finally, Bahrain and Saudi Arabia share the 300,000 bbl/d production of the Abu Safah offshore field.

Saudi Aramco operates the world’s largest oil processing facility and crude stabilization plant in the world at Abqaiq, in Eastern Saudi Arabia, with a crude processing capacity of more than 7 million bbl/d. The plant processes the majority of Arabian Extra Light and Arabian Light crude oils, as well as NGLs. The facility’s infrastructure includes pumping stations, GOSPs, hydro-desulphurization units, and an extensive network of pipelines that connects the plant to the ports of Ras al-Juaymah, Ras Tanura and Yanbu (for NGLs). Nearly two-thirds of Saudi crude is processed at Abqaiq before export or delivery to refineries. The facility has been the target of terrorist attacks (see Security Issues Section).

According to Oil and Gas Journal, Saudi Arabia has seven domestic refineries, with a combined crude throughput capacity of around 2.1 million bbl/d (of which Aramco’s share is approximately 1.7 million bbl/d). Aramco also has interests in another 2 million bbl/d of refining capacity overseas, making it the sixth largest oil refiner in the world. The Saudi Aramco development plan calls for a $70-billion investment in the sector, increasing domestic refining capacity to 3 million bbl/d and international holdings by at least 1-2 million bbl/d by 2011, particularly in an effort to meet requirements of the fast-growing Asian market.

One of Saudi Aramco’s strategies includes increasing private investment through joint ventures in refining activities, for which MOUs were signed on two projects in 2006 (Jubail and Yanbu’). As part of the privatization program, 30 percent of shares of new refineries will be offered to the public. The proposed facility at Jizan, which would be Saudi Arabia’s first privately owned an operated refinery, is said to be under consideration for investment by the Chinese. Aramco has previously partnered with ExxonMobil at their 400,000-bbl/d facility at Yanbu’ and with Shell at the existing 305,000-bbl/d facility at Jubail.

Saudi Arabia has approximately 2 million bbl/d interest in refining overseas in five main facilities in United States, China, South Korea, Japan and the Philippines. Saudi Aramco is also in talks with Sinopec to participate in the ongoing construction of a second facility in the northern Chinese province of Shandong (Qingdao). Both plants are expected to be able to handle a combination of Arabian Light and Arabian Heavy crudes. The first shipments of Saudi crude arrived at Qingdao in May-June 2008.

In July 2004, Aramco signed an agreement with Shell to purchase a 15 percent share in Showa Shell Group, a refining and marketing company based in Japan. Under the deal, Aramco supplies Showa Shell with 300,000 bbl/d of crude oil. Saudi Arabia also owns a 7.9 percent share in AOC Holdings, which operates the 192,000-bbl/d Sodegaura refinery in Japan through a subsidiary, Fuji Oil, among other facilities.

In the Philippines, Aramco is conducting preliminary studies on a new $5-billion refinery at Mindanao, which will supply East Asia and the US West Coast. Aramco is also a 40 percent shareholder in Philippine Petron, which runs a 180,000-bbl/d refinery on the island, although they are reportedly planning to divest by the end of 2008.

In the United States, Saudi Aramco and partner Royal Dutch/Shell own three Motiva joint-venture refineries in Louisiana and Texas. The three facilities currently have a total capacity of around 745,000, or approximately 5 percent of the U.S. refining market. Saudi Aramco owns 50 percent of Motiva though a subsidiary, Saudi Refining. Plans to more than double the capacity at the Port Arthur facility will make it the largest refinery in the United States.

In March 2005, Saudi Arabia and India signed an agreement on oil cooperation; with the Saudis reportedly interested in acquiring a stake in India Oil Company’s expansion of the 180,000-bbl/d Paradip refinery (it will reach 300,000-bbl/d by 2008). Saudi Aramco is reportedly considering taking a stake in Hindustan Petroleum Corporation Limited's (HPCL) Vishakhapatnam refinery (165,000 bbl/d capacity), which will double in capacity by 2010-2011. The status of the agreements is unknown.

Aramco also has a reported 35 percent interest in South Korea's 565,000-bbl/d SangYong (S-1) Oil Refining Company and a 50 percent share in the 100,000-bbl/d Motor Oil (Hellas) Corinth Refineries in Greece.

Gasoline and other refined fuels are sold in Saudi Arabia at some of the lowest prices in the world. Gasoline, diesel, LPG and other products are highly subsidized for domestic consumption. In May 2006, Saudi Arabia reduced the retail cost of gasoline by more than 30 percent, to the price of around $0.60 per gallon of premium gasoline (91) and $0.45 per gallon of regular gasoline (95). Saudi Arabia has phased out most leaded gasoline.

The Saudi petroleum pipeline and export network (and energy sector in general) remains a terrorism target. In February 2006, Saudi security prevented an attempted suicide bomb attack at the Abqaiq petroleum processing facility, after Al-Qaeda leadership called for renewed attacks against the country’s economic backbone.

Nevertheless, energy infrastructure remains well-protected. Following the February incident, the government increased the National Guard and military security force to approximately 20,000, in addition to the 5000 guards employed directly by Aramco. Reportedly, security spending has been ramped up since a series of attacks against energy infrastructure and foreign nationals at al-Khobar were carried out in 2004. In June 2008, Saudi Arabia’s Ministry of the Interior announced that they were holding suspected militants that were accused of planning a car bomb attack on an unspecified installation. Groups reportedly working in cooperation with Al-Qaeda have been operating in the Eastern Province and Yanbu.

In addition to direct security, Saudi Arabia is known to ensure export security by maintaining "redundancy" (i.e., multiple options for transportation and export) in its oil system, in part as a form of indirect security against any one facility being disabled.