A little more than a year ago, Saudi Arabia launched ambitious plans to expand its gas exploration nationwide, spurred on by ferocious demand from its industrial sector.
Although the kingdom has made its name supplying 11 per cent of the world’s crude oil, its proven gas reserves of 242 trillion cubic feet (tcf) place it among the world’s top five countries in terms of proven gas reserves.
Nearly 60 per cent of the kingdom’s total natural gas is in an associated form, which in the early years of the country’s crude-dominated sector was flared in line with standard industry practice.
In 1975, Saudi Aramco built a national gas system, known as the master gas system, but it was not until 2001, with the launch of the Hawiyah gas plant, that the kingdom had a facility fed entirely by non-associated gas.
The leap from that landmark to a nation-wide exploration hunt for non-associated gas is significant, according to one Aramco executive. “There is a big push now to gather as much data as possible so we can have an accurate assessment of our gas reserves throughout the kingdom,” the executive tells MEED. “This is not necessarily being driven by the local demand, but by the company wanting to get a handle on what else is out there.”
As part of its latest push, Aramco aims to add 50 tcf of non-associated gas reserves by 2016, although a new concession round – possibly involving oil majors – is unlikely to take shape until the start of the next decade.
Exploration areas include the Nafud Basin, northern Saudi Arabia, the Red Sea, Rub al-Khali (Empty Quarter) and the Gulf. “We believe these areas have been underexplored and we expect to acquire new seismic data by 2008/09,” says Abdulla al-Naimi, vice-president for exploration and production at Aramco.
Al-Naimi tells MEED that much of the seismic work has shown that the west coast is particularly promising. “Aramco has been aware of some promising formations especially in the Red Sea area,” he says. “It has only ever done an assessment along the coast, and this batch of testing will give definitive indications of gas prospects.”
However, he is less enthusiastic about prospects in the northern region of the kingdom. “There have been several wells drilled there over the years but not a lot of oil and gas from an initial scan,” he says.
The initial phase of the gas search covers the drilling of 300 development and more than 70 exploration and delineation wells. “In previous phases of gas and oil exploration, nearly all our efforts were focused near existing facilities,” says Al-Naimi. “Aramco is expanding its exploration programme to reflect new gas demand.”
While all Gulf countries are struggling with the dilemma of how to keep pace with spiralling domestic demand for gas, Saudi Arabia is more fortunate than most. In early 2007, the company unveiled the Karan field development, its first offshore non-associated gas field.
With Karan’s potential reserves estimated at more than 9 tcf of gas, Aramco has now fast-tracked development of the field, with $3bn earmarked to press ahead with the task of bringing 1 billion cubic feet a day (cf/d) of gas to the national grid by 2010.
Gas from Karan, originally earmarked for processing at the Khursaniyah plant, is now expected to be processed at a new facility set up to process gas from the Manifa field.
Aramco is also expanding production capacity at its onshore Ghazal field in the Mazalij area, with output expected to increase to 400 cf/d by 2008.
Other fields are also being developed. Production is set to come on stream from the Midrikah well, discovered in 2004, while further testing is being carried out on the Fazran field. “Gas will receive increasing focus as the industrial fuel of choice in Saudi Arabia,” Ali al-Ajmi, vice-president of project management at Aramco, told an energy conference in 2007.
Since 1994, when it started the non-associated gas exploration programme, Aramco has added reserves of 72 tcf from the Khuff, Unayzah and Jauf reservoirs. Much of the kingdom’s easier-to-extract gas supplies have been exhausted and the 50 tcf target is seen as a difficult challenge.
“Aramco is now starting to look at some of the prospects it has previously been aware of but never actually drilled,” the executive says. “The acquisition of data from this exercise should allow Aramco to plan drilling well into the next decade.”
Demand within the kingdom for new finds is immense. Natural gas demand is expected to reach 14.5 billion cf/d by 2030, from 5.5 billion cf/d today. The power and desalination sectors account for nearly 55 per cent of the kingdom’s gas consumption, with the remaining 45 per cent used as feedstock for petrochemicals.
By 2012, demand for propane, butane and natural gas is expected to increase by 177 per cent to 890 million cf/d , demand for ethane will rise by 140 per cent to 1.1 billion cf/d, while demand for sales gas will rise by 78 per cent to 7.7 billion cf/d.
It is becoming clear that while Aramco has the fourth-largest gas reserves in the world, it needs to fast-track exploration to keep feeding demand. “By 2010, we should have a clear idea of what we can expect for our next phase of growth,” the executive tells MEED.