RIYADH, Saudi Arabia, Oct. 11 (UPI) -- Saudi Arabia is pushing to boost its oil production capacity by 1.75 million barrels per day by 2017 and is fast-tracking shale gas exploration, analysts say.
There are indications that Saudi Arabia, the global oil industry's traditional swing producer that picks up the slack when output slips and keeps prices stable, is cranking up production already at a 32-year-high of more than 10 million barrels per day to cover shortfalls in crude exports by trouble-plagued Libya.
But the new program is a major shift in its strategic oil policy and has wider strategic objectives, industry analysts indicate. The kingdom is recalibrating its energy industry to meet the challenge of the United States' unprecedented production surge from its vast shale oil holdings that threaten Saudi Arabia's role as the world's leading oil producer.
This has dramatically altered the geopolitics of global energy long dominated by the Saudis.
Riyadh also is battling another problem. The country is consuming more of its own oil, which means reducing exports that provide most of the kingdom's revenue.
Domestic consumption, mainly to fuel demands for power generation, has reached nearly 3 million bpd and is growing at a rate of 7 percent a year. At that rate, domestic requirements will double in a decade.
"To meet the projected domestic and global demands by 2020, Saudi Arabia will have to pump between 12.5 million and 15 million bpd," Global Risk Insights observed recently.
"However, even if Saudi Arabia is able to ramp up production to this extent, it is unlikely that it will keep its single-handed ability to stabilize oil prices unless it also maintains a large spare capacity," the consultancy noted.
"Any regional event on a par with the Libyan civil war ... could send oil prices shooting upward, unless Saudi Arabia retains enough space capacity to fill the resulting supply gap."
While the kingdom seeks to develop new fields, enhance production from mature fields past their prime -- depleting at an estimated 8 percent a year -- and focus on shale gas, "much of the incremental capacity will have to be ring-fenced for power generation in the kingdom," Oxford Analytica observed.
"Although the rate of increase of domestic burn has at least slowed as new natural gas fields have come on stream, concerns remain that continued rising domestic demand will crowd out the kingdom's oil exports," Oxford Analytica said.
The Saudis have commenced an enhanced oil recovery program at Ghawar, the world's largest conventional oil field which has maintained an average production rate of 5 million bpd since the 1970s.
That's about half Saudi Arabia's total production. Ghawar also produces 2 billion cubic feet of natural gas a day.
Ghawar, 125 miles east of Riyadh, was brought on line in 1951 and is believed to have at least 70 billion barrels in reserves remaining.
Saudi Arabia's unlikely to produce much shale gas or oil this decade, in large part because of a shortage of water needed for the process of hydraulic fracturing, or fracking, to access the hydrocarbons embedded in rock formations.
But the original plan for the state-owned oil monopoly, Aramco, to start exploration in 2020 has been rushed forward seven years.
Unconventional gas reserves are almost completely untapped in the Middle East. But in March, Oil Minister Ali Naimi estimated Saudi Arabia has 600 trillion cubic feet of shale gas, more than double the kingdom's proven conventional reserves.
The debate over Saudi Arabia's energy strategy for the coming decades is a highly sensitive issue with immense political implications for the ruling House of Saud.
