Engineering consultancies line up for three-year shale gas study contract with the option of a further two years
Saudi Aramco has received the bids from engineering consultancies for a long-term contract aimed at conducting further studies of shale gas formations across the kingdom.
The study will last for three years with the option of a two-year expansion. The number of man-hours involved is at least 200,000.
At least six companies have submitted bids for the study. The bidders include:
- Foster Wheeler (US)
- Jacobs Engineering (US)
- KBR (US)
- Mustang Engineering (US)
- SNC Lavalin (Canada)
- WorleyParsons (Australia)
Bids are now under evaluation and an award is expected to be made by March.
The new study is fuelling speculation in the kingdom that there is more shale gas than previously thought. The US Baker Hughes has estimated shale gas reserves of 645 trillion cubic feet, but now industry experts believe the increased activity suggests an even greater figure. The kingdom has conventional gas reserves of almost 285 trillion cubic feet.
There is no question that there is abundant shale gas in Saudi Arabia, but there is much more to consider than confirmed reserves, says a senior Saudi Arabia-based oil and gas analyst. The economies of scale need to be there, otherwise it becomes prohibitively expensive. This means continued studies and test drilling.
The economic case for shale is becoming clearer as more studies are carried out and it is likely that some of the areas where production is expected will be far more costly than others.
The studies will be spread across several geographical locations. These include:
- The Empty Quarter
- South Ghawar in the Eastern Province
- Jalamid in the northern desert region.
Shale gas wells cost about $8m each and to produce 600 million cubic feet a day (cf/d) about 300 wells are required. Each well will need to be replaced on average every 12-18 months, which means an annual investment of well over $1bn for each shale gas producing region.
Most wells are drilled to about 6,000-7,000 feet, with some wells in the Empty Quarter expected to be drilled to depths of 12,000 feet.
In the US, they drill about 7,200 wells a year, which will give some indication of the work required to maintain a strong shale gas industry, says the analyst.
Coupled with this is capital expenditure required for the initial infrastructure. Pipelines, gas processing facilities and other requirements such as utilities will have to be built. South Ghawar already has much of this in place, but the Empty Quarter and Jalamid do not.
This is not cheap gas, says the oil analyst. In remote areas, the cost will be between $10 and $15 a million BTUs, with South Ghawar coming in at $6-$8 a million BTUs. Then there will be significant annual investments required to maintain production.
Saudi Aramco is committed to non-conventional gas and has formed a specialist unit within the company that will concentrate solely on the resource.
MEED also reported in mid-January that Aramco had already received bids for the front-end engineering and design (feed) contract for its planned development of shale gas.
Aramco invited bids for design work for gas treatment facilities and all accompanying offsites and utilities at South Ghawar, the Empty Quarter and Jalamid. The exact scope of works will not be known until the full feed is completed. The work is expected to be carried out both within Saudi Arabia and abroad.
The man-hours expected for the whole scheme are expected to be between 800,000 and 1 million.
Further evidence of Aramco ramping up its unconventional gas operations is that in October 2013, the company made enquiries with rig manufacturers regarding buying or leasing as many as 40 rigs that would be used in shale gas production.
Saudi Aramco was not available for comment when contacted by MEED.
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