LNG terminal to offer flexibility

04 April 2013

Liquefied natural gas imports will offer Riyadh a few years of breathing space to utilise its own resources

The activities of Saudi Aramco over the last two years have been almost solely focused on two sectors – petrochemicals and gas.

The two are closely linked with gas providing the feedstock for many of the products that the downstream chemicals industry produces.

The effort that Saudi Aramco is expending to utilise the kingdom’s gas deposits is admirable and the state-owned oil company has had to overcome a host of challenges to get the gas to market. High sulphur content of the gas has been the number one issue for Aramco. Sweetening the gas by lowering the sulphur content is not easy, but the majority of these problems are being solved.

Despite consuming almost 10 billion cubic feet a day of gas, the kingdom has an insatiable appetite for more.

Shale gas offers a real long-term solution to the gas shortage, but production from Saudi Arabia’s shale formations is still at least half a decade away.

It must be with this in mind that Saudi Arabia is now considering the option of building a liquefied natural gas (LNG) terminal on its Red Sea coast. As any Qatari oil executive will say, LNG offers the kind of flexibility that a static pipeline does not. Having one in place to initially import regular cargoes of gas offers the kingdom the chance to diversify its gas supplies and ensure all proposed projects will receive their allocations.

With so many industrial projects under way in the kingdom, as well as a desire to replace oil burning power stations with gas alternatives, LNG will offer Riyadh a few years of breathing space to fully utilise its own natural resources.  

The high price of LNG in Asia may be of a concern to some in Riyadh, but what must be remembered is that the global price of crude is equally high. Replacing the burning of its own crude with gas is a more efficient and environmentally sound move.

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