Oil and gas in numbers

$6bn: Estimated cost of the Wasit gas development programme

14.5 billion cf/d: Projected domestic gas consumption in Saudi Arabia by 2030

cf/d=Cubic feet a day. Source: MEED

As the world’s largest energy firm, Saudi Aramco has assumed the responsibility of keeping global oil supplies on an even keel. As other major oil producers endure wars, sanctions and general distrust from major Western oil consumers, Saudi Arabia aims to ensure that it has ample additional capacity to cover any situation.

Shaybah is a good example of how Aramco are looking to … maximise its domestic gas supplies

Saudi-based industry expert

In 2009, Aramco announced that its expansion project was complete and capacity stood at 12.5 million barrels a day (b/d). Reaching this milestone, coupled with a global recession that lowered demand, the state-owned oil giant turned its attention to the home front – and increasing its gas capacity to service the booming domestic market.

The kingdom has the world’s fourth largest reserves of gas and Aramco reported in 2009 that its reserves stood at around 275.2 trillion cubic feet. In 2009, 8.556 billion cubic feet-a-day (cf/d) of raw gas was sent to be processed at Saudi Arabia’s gas plants. 

Aramco gas reserves
Figures in trillions of square feet
Year Gas reserves (associated and non-associated)
2005 239.5
2006 248.5
2007 253.8
2008 263
2009 275.2
Source: Saudi Aramco

Saudi Arabia’s Petroleum & Mineral Resources Ministry has predicted that domestic gas consumption will rise to about 14.5 billion cf/d by 2030 from its current level of 7.4 billion cf/d.

As the kingdom executes its ambitious industrial diversification plans, gas has been cited as the cost effective, clean energy source that will give Saudi Arabia a competitive edge.

Gas demand for industries in Saudi Arabia

Like the majority of its neighbours, Saudi Arabia knows that it has a limited amount of time to put the proper infrastructure in place to ensure that there are enough jobs for one of the fastest growing populations in the developed world.

The kingdom has identified a number of industrial areas that it wants to focus on, most notably petrochemicals and plastics production. One of Saudi Arabia’s key strategies to make it a global player is providing cheap natural gas for use as a feedstock to its major petrochemicals producers. To give an example, Saudi Aramco charges petrochemicals producers around $0.75 per million BTUs of ethane, while rival producers in the US are charged about $3.50-$4 for the same amount. 

Other energy intensive industries such as steel and aluminium production also rely heavily on cheap gas to gain a competitive edge on the global market.

Growing power and desalination demand has tightened the kingdom’s gas supply and the kingdom will have to raise capacity to 59,000MW by 2020, according to some estimates.

In 2009, installed capacity stood at about 44,500MW and around 35 per cent of this came from gas fired power stations. However, a lot of future capacity is expected to run on liquids due to Saudi Arabia wanting to use gas for its export driven industry rather than its heavily subsidised power and water industry. 

There are a couple of notable exceptions that will run on gas. The 2,400MW Ras al-Zour power plant will utilise the gas allocation given to the neighbouring $10.8bn aluminium complex being built by the Saudi Arabian Mining Company (Maaden) and the US’ Alcoa. The Riyadh PP11 power plant will also run on gas due to its location in the capital.   

Aramco planned gas projects

Aramco has a number of multi-billion dollar gas projects in development and it is considering the viability of more recently discovered non-associated fields such as Zimlah, Kassab and Nujayman for feedstock.

The development of these non-associated gas fields is being fast-tracked by Aramco, not only because the kingdom needs the gas, but also that supplies from non-associated fields are not dependent on global oil demand.   

The oil giant’s first non-associated gas field development is the $3.38bn, 1.8 billion cf/d capacity Karan, which is expected to start producing its first gas in mid-2011. The first phase will provide around 450 million cf/d, with the remainder being added incrementally until full capacity is reached in 2013. 

The gas will be transferred via a 110km subsea pipeline to be processed at the Khursaniyah Gas Plant, which has recently been upgraded to handle the extra capacity from various Aramco gas developments.

The largest project in the kingdom is the $6bn-plus Wasit gas development programme on Saudi Arabia’s Gulf coast.

The Wasit scheme will see the two offshore non-associated sulphur-heavy gas fields, Arabiyah and Hasbah, undergo development by Aramco. Around 2.5 billion cf/d of gas will be produced from the fields and transported to the processing facility at Wasit.

Both fields contain sulphur heavy gas that requires a lot of processing, so the onshore facilities required are more complex than those required for conventional gas.

Four engineering, procurement and construction (EPC) contracts are available for the main onshore processing facilities at Wasit, with another $500m contract for the site preparation. When complete, the facilities will be capable of handling 1.7 billion cf/d of gas and 4,800 tonnes a day (t/d) of sulphur. EPC contracts have also been tendered for the offshore packages, which will cover the construction of production platforms, pipelines and power cables at Arabiyah and Hasbah.

Bids are in for all of the onshore packages from the prequalified contractors, with bids for the offshore packages due in at the end of November. A decision on the site preparation contract is expected in December, with the remaining announcements due in the first quarter of 2011.

Competitive bidding for Wasit project

“Expect competitive bidding for the Wasit project packages,” says a source from one of the bidding contractor. “Many of the [prequalified] contractors have had a quiet 2010 and have targeted Wasit as a last chance of getting serious figures on the board before the year end.”

Due to similarities, the majority of the EPC contractors bidding for the onshore packages at Wasit have also been prequalified for the $3bn Shaybah natural gas liquids (NGL) project in the kingdom’s Empty Quarter.

Shaybah is an existing oil field and the NGL project will see Aramco separate around 228,000 b/d of NGL from crude oil.

The EPC packages on offer at Shaybah cover the construction of a cogeneration plant, a gas treatment facility, an NGL recovery plant and utilities.

Phase one of the gas processing facilities will involve the construction of two NGL trains. Ethane and propane will also be produced.

The deadline for bids has been extended to December 2010 with the winning companies being announced in 2011.

“Shaybah is a good example of how Aramco is looking to utilise every single resource it has to maximise its domestic gas supplies,” says a Saudi Arabia-based industry expert. “A decade ago there is no way such a scheme would have even been considered.”

Another good example of Aramco maximising its associated gas reserves is the development of the huge offshore Manifa field in the Gulf.

Manifa will produce around 120 million cf/d of associated sour gas from 900,000 b/d of oil. The gas will be processed at the Khursaniyah Gas Plant. 

Work has started at Manifa and initial production is due to start in 2013. Contracting sources in the kingdom are even saying that Manifa’s capacity could be increased to 1.2 million b/d. 

“Aramco are considering this plan because obviously as much as for the extra gas as for the oil,” says a Saudi-based source familiar with the Manifa project. “They can take time to make the decision because the field will not reach its full capacity until 2024.”

Associated gas production

Other associated fields now producing gas for Aramco include the recent Khurais development, which produces 315 million cf/d of sour gas processed at the Shedgum Gas Plant.

The onshore field also produces 70,000 b/d of NGL, which is processed at the Yanbu Gas Plant.

While global oil demand may have made a dent in Saudi Arabia’s export revenues over the past two years, there is no denying that it has also given the company the breathing space it needs to develop its gas programme. 

The effective use of the billions of dollars being spent on increasing gas production to drive economic growth is now essential.

With one of the fastest growing youth populations in the world Saudi Arabia needs to be able to offer job opportunities to its young in the future. 

If done properly maximising natural gas resources will make the kingdom’s future industrial endeavours highly competitive in the global market.