Saudi Arabia has big gas plans, with Aramco eyeing a twofold increase in its natural gas production over the next ten years as it seeks to switch local power plants to gas from oil, so it can export more crude. This gas, apparently, could come from shale deposits.
The World Energy Council estimates that Saudi Arabia has recoverable gas reserves of 7.49 billion tons of oil equivalent. Proved reserves stood at 8.489 trillion cu m as of 2014. These are just conventional gas figures, the WEC notes. According to Aramco’s head of unconventional resources, Khalid Al Abdulqader, the country’s shale gas resources are “huge.”
One of the top spots for shale gas drilling is the Jafurah basin, which is similar in size to Texas’ Eagle Ford, according to Al Abdulqader, but he declined to give any details regarding the reserves in place. Analysts that Bloomberg’s Wael Mahdi and Bruce Stanley spoke to believe that it is perfectly possible for the shale basins in the Kingdom to contain a lot of gas. The question is whether this gas is actually recoverable at a cost that is low enough to make production viable.
If historical data is any judge, this is doubtful. Mahdi and Stanley note the string of exits by international oil and gas companies after they failed to make any meaningful gas discoveries in the Kingdom. These included French Total, Italy’s Eni, and Spanish Repsol. Exxon and Chevron have operations in the country, but not in gas exploration. Lukoil was the latest to announce it was pulling out of its Saudi gas drilling venture last year after it failed to discover any reserves.
Ramping up its gas production makes a lot of sense for Saudi Arabia. Constrained by the OPEC oil production cut deal, the Kingdom would naturally be looking for ways to maximize its oil export revenues without increasing production, at least for the time being. Aramco has planned investments of US$300 billion over the next decade to maintain its spare production capacity and also expand gas exploration, both conventional and unconventional. By 2028, according to plans, Aramco should be producing 23 billion cu ft of natural gas. Related: Saudis Hint They Could Delay Aramco IPO Until 2019
How attainable this goal is still an unknown. Riyadh is being upbeat, but then again, Riyadh is always upbeat about its oil and gas plans. The fact that Al Abdulqader has shied away from revealing any estimate of the size of resources in the Jafurah basin—or any other shale basin for that matter—could be interpreted in one of three ways.
One, that Aramco is keeping its gas cards close to its chest, biding its time until the moment comes to wow the world with massive gas reserves. Two, that a reliable estimate is yet to be made. And three, that Al Abdulqader’s statement about the Kingdom’s huge gas reserves is timed perfectly as part of the Aramco pitch for investors as the company moves closer to its listing, scheduled for the second half of this year.
Aramco is currently drilling for gas in Jafurah and in South Ghawar, the world’s largest oil field. We can reasonably expect more news in the coming months if the drilling campaign is successful. After all, diversification sells, even if it’s this kind of internal diversification from oil into gas.
By Irina Slav for Oilprice.com
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