Shale gas plans move forward

03 October 2013

Although there have been no official announcements, large-scale production of shale gas is looking likely in Saudi Arabia

Saudi Aramco’s fast-tracking of its shale gas operations is moving quicker than many previously thought. Despite there being no announcements by the state-owned oil company, there is no doubt that the kingdom has enough shale gas resources to justify investing in full-scale production.

Exactly how far the scope of Aramco’s shale gas plans will go will not be known until the tender is released. However, the company is in talks to secure some 40 extra rigs to cover its shale gas operations and this is a firm indication that large-scale production is expected.

Unconventional gas sources are almost completely untapped in the Middle East and despite many observers predicting that US shale gas is a serious threat to the region, it might actually have the reverse effect.

One thing the US is extremely good at is evolving its oil and gas industry. A decade ago, no one would have predicted the effect shale gas would have in the US. Now, it is fuelling a boom across several industrial sectors.

The technology used to extract shale gas is improving each year and this will result in cheaper production costs in the Middle East. It will remain a pricey undertaking, however, costing about $8-$9 a million BTUs to extract and process the resource in Saudi Arabia. This is still less than half the cost of burning oil and if the gas can also be used as a feedstock for industry then the value of the resource increases further still.

Saudi Arabia’s fast-tracking of shale gas shows how seriously Aramco is taking its obligation to increase gas production. In 2011, the company predicted it would start looking at shale in 2020, but it is pushing through a design tender more than six years earlier.

Aramco deserves plaudits for ramping up operations on a resource that was virtually unknown five years ago.

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