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In an attempt to reduce its domestic consumption of oil, and therefore free up more product for export to the world markets, Saudi Arabia plans to become one of the first countries outside of North America to use shale gas for power generation.
The US shale gas boom transformed the country from the largest gas importer in the world, to a potentially huge exporter, and Saudi Arabia hopes that fracking will supply it with an abundance of natural gas that can be used for domestic power generation.
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Khalid al-Falih, the chief executive officer at Saudi Aramco, spoke out at the World Energy Congress on Monday, stating that “we are ready to start producing our own shale gas and unconventional resources in various types in the next few years and deliver them to consumers. Only two years after launching our own unconventional gas programme, in the northern region of Saudi Arabia, we are ready to commit gas for the development of a 1,000 megawatt power plant which will feed a massive phosphate mining and manufacturing sector.”
The IEA’s top 10 countries with technically recoverable shale gas resources. Saudi Arabia, with 600 trillion cubic metres would be number five, between the US and Canada.
Saudi Oil Minister Ali al-Naimi, has estimated that the country contains unconventional gas reserves of over 600 trillion cubic feet, giving the country the fifth largest reserves in the world according to the US Energy Information Administration.
Unfortunately, due to a scarcity of water, a vital part of hydraulic fracturing, and current natural gas prices, which are far lower than production costs, Reuters claims that it is unlikely that Saudi Arabia will be able to produce much shale gas before the end of the decade. Oman is the mostly likely to develop its unconventional gas reserves, with commercial production potentially starting in 2017.
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Saudi Aramco has predicted that the country’s natural gas demand will double by 2030, a problem for a country that has a ban on all natural gas imports. In preparation it is exploring for hidden reserves of shale gas across the country, mapping the deposits, and hoping that they will help it meet the future demand.
Shale gas will be used to feed a proposed power plant in Jizan, which Saudi Aramco hope to complete by 2017, although many have warned that this date is likely to be pushed back as work on associated infrastructure is already behind schedule.
Saudi Arabia believes that using shale gas for domestic power production will help it to maintain the largest spare oil production capacity in the world, vital to protect the oil markets from changes in production output of political unstable nations, and guarding against the potential price spikes that could occur as a result.
Al-Falih said that, “as part of our drive to become the world's most integrated energy company, we have increased our annual capital budget tenfold from $4 to $40 billion in the last 10 years.
In the past two years alone, we have swung our production by more than 1.5 million bpd in order to address market supply imbalances.”
By. Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com
As for economics if oil is being conserved by use of supplementing natural gas then economics are based on oil price not gas price. Another cover story.