Saudi Arabia has started production from its giant Khurais oilfield, the largest ever single addition to global oil supplies, Saudi Aramco's top executive said in remarks broadcast on Wednesday.

"I am happy to report today that Khurais has entered the stage of operation," Khalid al-Falih told Al Arabiya television in an interview. "Oil will reach Aramco terminals in a few days for exports... it did not reach the stage of export (yet)."    

"The oil from the plant is now being pumped into tanks that are at the project," he said, adding that the field's capacity can now be seen as part of Saudi Arabia's total output capacity.

The kingdom does not need to use the extra capacity at current demand levels, the head of the state oil company said.

The 1.2 million barrels per day (bpd) Khurais field contains highly prized Arab Light crude, which is easily converted into transport fuel.

Khurais would also produce 315 million cubic feet per day (cfd) of sour gas and 70,000 bpd of natural gas liquids (NGL) to be processed at Shedgum and Yanbu gas plants.

The field can supply over 1.5 percent of daily global oil demand and pump more than two of Opec's smallest members. "It's the single largest development that they have ever had," said Raja Kiwan, an analyst with PFC Energy.

The project brings to a close the latest expansion in oil output capacity in the top oil exporter and the most influential member of the Organization of the Petroleum Exporting Countries.

Saudi capacity has reached 12.5 million bpd. The kingdom has no immediate plans to raise its output potential further, but has outlined how it could reach 15 million bpd capacity when global oil demand requires.

"Khurais oil field is truly the biggest ever single increment to global production of light crude, said Tariq Qais Alsuqair, an analyst at Energy Economics said.

"The importance of such an increment is to ensure Saudi Arabia's commitment to the equilibrium of the oil market as a swing producer that secures any shortage in supply."    

The global economic recession has slowed oil demand and forced the Saudis to cut supplies with other Opec members.

Khurais puts Saudi spare capacity at about 4.5 million bpd, more than the output capacity of Iran, Opec's second largest producer, and enough to offset a major global supply outage.

Spare capacity is more than three times that targeted by the kingdom, of between 1.5 million bpd and 2 million bpd, to meet any unexpected outages. Saudi Arabia is the only Opec country with significant spare capacity that can be tapped quickly.

"We project Opec's total spare production capacity to be 5.2 million bpd for 2010, last time it was that high was in 2002," Tancred Lidderdale, head of Petroleum Supply at the US government Energy Information Agency (EIA), said.

Spare capacity eroded as demand grew quickly from China in 2004, but that cushion has now been replaced, giving the kingdom more spare capacity than it has had for a decade, Alsuqair said.

"Opec spare capacity was 5.7 million bpd in 1998-2000 so i would assume that Saudi spare capacity nowadays is experiencing the 1998-2000 period," Lidderdale said.

"However, the component of the spare capacity (light, heavy, medium) should be different since Khurais (light crude) comes on line adding more light crude to the ratio."    

Khurais would produce for 20-25 years, Aramco says.

The project is named after the Khurais oilfield, but will handle oil from three fields: Khurais, Abu Jifan and Mazalij.

Saudi produces more oil from the world's largest field, at Ghawar. But that production was brought online in stages, not in a single phase. It plans to pump at full capacity at Khurais allowing it to rest capacity elsewhere, including at Ghawar.

The project involved drilling