Saudi Aramco makes gas the priority

31 October 2012

New MEED Insight report outlines Saudi Arabia’s ambitious gas plans

Saudi Arabia’s booming domestic gas growth of 5-6 per cent a year has meant that state-owned oil company Saudi Aramco has been forced to prioritise gas exploration to ensure the kingdom can keep up with demand.

According to a recently published MEED Insight report on the GCC’s oil and gas industry, Saudi Arabia’s gas reserves may look abundant, but the reality is Aramco has to work hard to bring this precious natural resource to market.

Just over half of the kingdom’s gas reserves of 282 trillion cubic feet are associated and tied to oil production. This means they are subject to the ebbs and flows of the international oil market and can drop significantly if Opec applies quotas to its member states.

Of the remaining 100 trillion cubic feet that I non-associated gas, 75 per cent either has a high sulphur content or is held in a tight formation. This leaves just 25 trillion cubic feet of easily obtainable gas reserves. Gas is at such a premium that Riyadh has even started to form a contingency plan that would involve the, previously unthinkable, situation of importing liquefied natural gas (LNG).

Aramco is on track to increase domestic reserves by 50 trillion cubic feet by 2016, as well as ramp up daily production to 15 billion cubic feet a day (cf/d) by 2015. These measures should ensure Riyadh is supplying enough gas for power generation and seawater desalination, but has enough to provide feedstock to drive through its ambitious industrial diversification plans.

With all hydrocarbon production, a diversified supply is the key to providing energy security and this is why Aramco is now fast-tracking a number of unconventional gas sources as well as ramping up its seismic surveys off the Red Sea coast.

The port city of Duba in the Tabruk Province on the Red Sea coast is the closet major urban area to two very different gas projects. Inland a small non-associated gas field, Midyan, is under development and will provide 75 million cf/d. In the past it is highly unlikely that such a small undertaking would have been executed by Saudi Aramco.

Aramco also announced in October that it had made a find about 26 kilometres off the coast of Duba. Test wells for a non-associated gas field have brought back promising results and the oil major believes it can fast-track development within the next four years.

The major game changer for the kingdom could be its shale gas deposits. Seismic surveys are still being carried out close to the Jordan and Iraq borders, but some estimates have predicted as much as 645 trillion cubic feet of gas could be added to Saudi Arabia’s reserves. Production of shale gas is expensive, but the value chain Riyadh is putting in place would still justify the capital expenditure.  

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