Technological focus gives Saudi Aramco strong upside: BMI Research

Saudi Aramco has strong upside to profit, reserves and production backed by continued technological advancements, particularly with regard to development of non-associated and tight gas resources, BMI Research, a Fitch Group company, said in a recent report.

As companies focus on maximizing gains from existing resources amid continued declines in oil prices, the state-owned oil producer has huge investments in research and development (R&D) to enhance its resource discovery and recovery rates and improve operational efficiencies.

Aramco, however, uses geochemical techniques, chemical and CO2 EOR, optimized drilling and completions, alternative fracturing fluids and proppants, 3D integrated reservoir modelling and autonomous machines in other projects.

"From a global perspective, the focus on technology is appropriate given the soft recovery in prices and increasingly bearish outlook on demand,” BMI added. “Against this backdrop, where revenue growth is somewhat constrained, the challenge is to protect and grow the margins. For this, technological advancements have a key role to play, in lower costs and improving productivity."

Saudi Arabia has another core focus that is shifting to gas. The oil firm is currently deploying a new seismic technology around the Turayqa gas field in the Empty Quarter, an area that had been explored earlier through joint ventures with several foreign oil producers, including Royal Dutch Shell, Italy's Eni and Repsol. However, these companies exited the market over the past decade, due to the lack of commercial finds.

The Kingdom's tight reservoirs also represent a major gas resource base. Development of such resources is hindered by low local gas prices, the lack of foreign participation, geology complexity, water scarcity and under-developed infrastructure in the region.

Technological advancement will be key to overcoming these hindrances through the current R&D programs that include the use of waterless fracturing fluids and the use of resin-enhanced locals and to cut production costs.

BMI analysts added that these programs are still in early stages, expecting progress on unconventional products to continue to lag, in the absence of major pricing reforms and opening up to foreign entrants into the market.