Is shale gas a game-changer for Saudi Arabia?


The first major contracts for Saudi Arabia’s Jafurah field – allegedly the largest shale gas field outside the United States – were awarded last week, as the Kingdom aims to become the third largest gas producer natural to the world by 2030, to the point where it could even become a net exporter of gas. This, in turn – if true – would allow Saudi Arabia to meet its supposed target of producing half of its electricity from gas and the other half from renewable energy sources in the region. pursuit of its goal of zero net greenhouse gas emissions by 2060. However, as analyzed in depth in my new book on world oil markets, Saudi Arabia’s statements about its oil sector in the past have been greatly exaggerated – because without its oil might the country has no real power – and hence its comments on its gas and net zero plans should also be viewed with skepticism. This was once again evidence – specifically focused on its gas and net zero targets – when Saudi Arabia was recently accused of having pressured the United Nations minimize the need to move away from fossil fuels quickly.

In general terms, the Jafurah shale gas basin is estimated to contain at least 200 trillion standard cubic feet (scf) of in-place gas, covering an area of ​​approximately 17,000 square kilometers. Its lead developer, Saudi Aramco, expects the site’s natural gas production to grow from around 200 million cubic feet per day (scfd) in 2024/2025 to a sustainable rate of scfd 2.2 billion. gas by 2030. In addition, the development is also expected to produce 418 million scfd of ethane and around 630,000 barrels per day of liquids and gas condensates, which are intended for use in the Kingdom’s petrochemical sector. According to Aramco, the company’s shale gas program will replace about 500,000 barrels per day (b / d) of crude oil production, with Jafurah’s development accounting for about 300,000 b / d of peak production. In addition to the $ 10 billion in contracts initially awarded last week, the Jafurah Project will see at least $ 58 billion in additional investment by 2030.

So, will all of this allow Saudi Arabia to achieve its goals stated above? No, is the short answer. To begin with, there are questions regarding the volume of seawater that will need to be desalinated before it is used in the gas processing plants involved in the Kingdom’s shale gas campaign, both technically and financial. It is true that the Saudis have used desalination equipment for many years in the drilling industry, but the country’s shale gas initiatives will be of a different order. This was indicated by Aramco’s recent call for tenders local and international companies to build a large-scale water desalination plant project in the Jafurah shale gas field. An earlier RFQ was canceled, and the request this time is for a desalination plant with 20% less capacity. It is also a fact that the Jafurah shale gas frackings will occur at much deeper levels than the generally much shallower U.S. equivalents – at around 9,000 to 10,000 feet in the case of Saudi Arabia versus around 3000 to 4000 feet in the case of the United States – according to Aramco data, which makes the process much more expensive. Sources in Aramco have said this may be partially offset by other resources being mined concomitantly – notably ethane – but that remains speculative at this point.

In terms of hard gas production figures, too, there are more questions. According to Aramco’s figures, the Jafurah site has around 200 trillion cubic feet, a figure that should be taken in the context of all other estimates of Saudi Arabia’s energy reserves, but let’s assume that’s true. Meanwhile, Aramco has assumed gas reserves of around 233.8 trillion cubic feet, which for the purposes of this analysis we can assume the same on the same basis. The plan is for Aramco to start production from Jafurah in 2024/25 and reach scfd 2.2 billion of gas by 2036. Last year – without Jafurah – Aramco produced scfd 8.9 billion of natural gas. This would give a notional total – with Jafurah – of 11.1 Gcf / d. Importantly, even with this current production of 8.9 Bcf / d of gas, Saudi Arabia burns around 400,000 b / d of oil for power generation (in addition to the actual huge volumes of fuel oil and diesel) .

All other factors remaining equal, one billion cubic feet of gas is equivalent to 0.167 million barrels of oil equivalent, so 2.2 Gcf / d (the future production of Jafurah) is equivalent to 0.3674 million barrels of oil equivalent. oil, or 367,400 barrels. Therefore, the new total projected amount of gas coming from Jafurah is approximately 367,400 barrels per day, which is not even enough to cover the current amount of oil (400,000 b / d) burned for production. electricity in Saudi Arabia, although Aramco is already high. gas production is maintained. Therefore, Saudi Arabia’s claims that this switch to gas will contribute significantly to any goal of net zero greenhouse gas emissions are not true. This is even more evident when considering Saudi Arabia’s double-dealing in meeting IMO compliance targets, as exclusively analyzed at the time by OilPrice.com.

And what about Saudi Arabia’s claims that it will become such a large producer of shale gas that it may even become a large net exporter of gas? Based on independent industry estimates of Saudi Arabia’s changing demographics and the corresponding changing patterns of electricity demand, the Kingdom is likely to need gas production of around 23% to 25 Bcf / d over the next 15 years just to meet its own power and industrial demand, compared to the 11.1 Bcf / d of Aramco’s current peak production on top of Jafurah’s notional production. In sum, even if the quality of Jafurah’s discovery is unprecedented in the history of gas discoveries, Saudi Arabia would still be in deficit in its power generation sector if there were a direct passage from the combustion of crude oil with the combustion of gas only.

By Simon Watkins for Oil chauffage

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