The global perception of the Middle East as a region with an over-abundance of natural resources is only half correct.
The region has spent the past seven decades selling its oil and gas to fuel insatiable demand elsewhere. In many cases, this strategy has meant many oil-producing countries have not given their domestic needs as much attention as they should have done.
Saudi Arabia cannot deny it is guilty of falling into this category and, despite some success in growing its industrial base over the last 20 years, it still requires enormous investment in many sectors. Now the kingdom is using about 3 million barrels a day of its crude for domestic use, such as power generation, due to a lack of alternative sources of fuel.
To diversify its energy mix, state oil firm Saudi Aramco is now developing several large-scale non-associated gas fields in the kingdom in a bid to push gas production up to 15 billion cubic feet a day (cf/d) from the current 9.9 billion cf/d. The kingdom does have gas, but much of its non-associated reserves have a high sulphur content. As a result, some projects are proving time-consuming to bring online.
The oil major has previously stated that the development of shale gas in the kingdom would probably commence in 2020 and that up until now a feasibility study was being carried out. Now it transpires this time scale is being dramatically fast-tracked and that a development contract could be awarded to an oilfield services company in 2013.
Shale gas production is not cheap. It will be more than 10 times more expensive to produce than the gas Saudi Aramco currently sells to companies for industrial purposes. However, with most experts believing the age of cheap oil is now over, shale gas being used as a substitute for burning crude in the kingdom’s power stations may prove more economically viable.