Saudi gas output to soar, but no exports yet

01 November 2002

Top Saudi oil officials outlined plans for huge increases in natural gas production to meet soaring domestic demand, and the liberalisation of the gas supply chain to allow private investment at the Future Vision of the Saudi Economy symposium, held in Riyadh's King Faisal Hall on 19-23 October. The commitment to the Saudi gas initiative was reaffirmed, but there was no indication of Saudi moves to emulate its neighbours by developing liquefied natural gas (LNG) capacity.

In a session on mineral and gas development, chaired by Petroleum & Mineral Resources Minister Ali Naimi, delegates were told that total gas sales capacity will rise to about 7,000 million cubic feet a day (cf/d) in 2007 from under 4,000 million cf/d at present. 'These increases in the supply of gas and its associated products will provide further support to the growth of the economy and will keep the kingdom in the top 10 of gas producing countries worldwide,' said Khalid al-Falih, Saudi Aramco'svice-president for gas ventures development and co-ordination.

Al-Falih said an ethane recovery project at Berri gas plant is scheduled for start-up by the middle of 2003, raising ethane production to more than 550 million cf/d that year. Production of natural gas liquids (NGL) will rise to more than 750,000 barrels a day (b/d) in 2003, of which 340,000 b/d will be exported.

'Two mega-projects are planned for the additional recovery of ethane and NGL,' Al-Falih said. 'The first is to process the combined rich gas streams from the Hawiyah and Haradh gas plants, while the second will process an associated gas stream to be supplied from the Shaybah field. These projects will increase the kingdom's total production capacities of ethane and NGL to 900 million cf/d and 950,000 b/d respectively.'

Al-Falih said the kingdom's proven gas reserves are now 224 trillion cubic feet (tcf), the fourth largest in the world after the former Soviet Union, Qatar and Iran. About 136 tcf is in the form of associated gas. 'To meet the growth in natural gas demand, Saudi Aramco has been exploring for non-associated gas in geological horizons deeper than those containing oil reserves,' Al-Falih said.

He said gas demand in the kingdom was growing rapidly and that per capita consumption - at 246 cf/d - was among the highest in the world. He forecast gas sales demand rising to 12,000 million cf/d in 2025. Ethane demand would rise to 950 million cf/d and NGL demand to just over 1 million b/d in the same period.

Al-Falih said long-term plans called for mixing gas feedstocks to help maximise polyolefin production. The plans, including the Saudi gas initiative, call for opening the gas sector to private investment. 'The future (gas) industry structure will permit private investors to participate in all aspects of the gas industry,' he said.

The upstream sector would be dominated by Saudi Aramco and by joint ventures between the oil company and private investors. The kingdom will 'facilitate' common carrier and third-party access to pipelines and midstream facilities. Al-Falih added that licences will be issued to owners and operators of new gas networks outside the master gas system to allow them to market production domestically. Separate licences are to be issued for local distribution systems.

In a question-and-answer session, Naimi referred to the gas initiative negotiations: 'This initiative is particularly significant because it involves remarkable sums of money,' he said. 'It is natural that the negotiations on this particular type of investment will take place (where) each party tries to get maximum return.'

'The second step of these negotiations is due soon,' he continued. 'We expect a final answer.we hope the answer will come very shortly, within weeks.' International oil companies are due to submit by early November their final responses to the government's offer (MEED 4:10:02).

In response to a question about whether the kingdom would export gas, Naimi said: 'The aim of the kingdom at present is the extraction of gas in order to meet local demand for industry, electric power and water. This is the policy of the country at present.'

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