Report: Saudi Aramco Shuts Down Two Supergiant Offshore Oil Fields

Saudi Arabia has joined Kuwait and Iraq in beginning the process of drawing down oil production, a response to the closure of the Strait of Hormuz and a shortage of storage options. The Wall Street Journal has confirmed that Saudi Aramco has shut down the Safaniya and Zuluf fields, taking two million barrels per day of production offline.

Safaniya is the world's largest offshore oil field, containing more than 30 billion barrels of oil in proven reserves, and Saudi Aramco has invested heavily in a program to modernize its extraction infrastructure to sustain production at levels exceeding one million barrels per day. Zuluf is another supergiant estimated at about 30 billion barrels, and has a nameplate production capacity in excess of one million bpd.

Iraq has already shut in enough production to match the sudden stoppage in exports caused by the closure of the Strait of Hormuz, and is producing just enough to satisfy domestic demand. Kuwait has signaled that it is slowing production as storage fills up, but it is hoping to preserve the ability to restart quickly once the transport situation normalizes.

Saudi Arabia has more extensive tank storage options than its neighbors, and while it is normally dependent on Hormuz shipping for exports, it has another alternative. The Saudis operate a 750-mile pipeline connection from Gulf oil fields to a terminal at Yanbu, on the Red Sea. This circumvents the risks at Hormuz, though the Red Sea has security challenges of its own. The Saudi East-West pipeline can handle 7 million barrels per day and the Yanbu terminal can load up to 4.5 million barrels, according to Kpler - nearly half of all Saudi production, but not all of it.

The ongoing conflict has had other effects on offshore operations. Contractor Borr Drilling has suspended operations on three of its jackup rigs in the Arabian Gulf amidst ongoing hostilities, the company said.

Two rigs in Qatari waters and another rig off the UAE have been downmanned to reduce risk, the company said. The action follows an unspecified incident aboard a customer-owned platform, which prompted Borr to shut down and evacuate the rig Arabia III.

All of the rigs remain under contract and covered by insurance, the firm said.