The costs of producing shale gas are falling every year, which means Aramco can take its shale plans slowly until its planned date of 2020
The US shale gas industry has caused a major paradigm shift in the global energy sector and has led many countries with unconventional hydrocarbons resources to believe they too must harness the resource. Saudi Arabia is not one of them. The kingdom is the worlds largest oil exporter and has huge conventional reserves of both oil and gas, in addition to an estimated 685 trillion cubic feet of shale gas.
Aramco is already developing fields that will push its gas capacity up to 14-15 billion cubic feet a day by 2018
Due to domestic demand, Saudi Aramco has been keen to exploit its shale gas and fast-track its development. However, it is now looking more likely that shale gas production is still at least half a decade away and that the costs of exploiting the reserves currently outweigh the benefits it would bring.
What needs to be remembered here is that Aramco is already developing fields that will push its gas capacity up to 14-15 billion cubic feet a day by 2018. This is being achieved by executing two giant offshore non-associated gas projects, as well as ramping up associated gas production from its oil fields.
Aramco is also developing further initiatives aimed at utilising other resources to free up gas for power production. These include the planned Jizan integrated gasification combined-cycle power plant, as well as utilising liquid feedstock for petrochemicals production.
By planning how best to utilise resources, Aramco is putting together a sustainable plan for the kingdoms future energy needs. It is likely the firms senior management believes this is a more coherent policy rather than making a hasty decision on its shale gas reserves.
The kingdoms shale gas is going nowhere and the costs associated with its production are getting lower every year as the US develops new technology to produce it. Aramcos original plan was to start production of shale gas in 2020. By then, costs could have halved, thus making it a far more attractive prospect.
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