What is behind Saudi Arabia’s pivot to natural gas?

Saudi Aramco’s request for bids from local and international companies for the construction of a water desalination plant project in the Jafurah shale gas field highlights the Kingdom’s claims to be at the forefront of the global energy transition to cleaner energy through reduced carbon emissions. As with many of his biggest complaints about his oil industry – most recently analyzed here – this claim regarding his desire for cleaner energy is also extremely misleading and also seems to align with the alleged attempts to put pressure on the UN minimize the need to move away from fossil fuels quickly. Saudi Arabia announced with great fanfare in early 2020 that it would spend at least US $ 110 billion on the Jafurah gas project, with the intention of becoming the world’s third largest gas producer by 2030, after the United States and Russia, and a net exporter of gas at that time. As even Aramco noticed that Saudi Arabia does not have an abundant supply of fresh water – its managing director, Amin Nasser, remarked early on that “we are not rich in water” – the company will instead use seawater for the hydraulic fracturing process, hence the new contracts for a desalination plant.

According to the Saudis, the Jafurah field has an estimate of 200 trillion cubic feet of gas (TcF), a figure that should be taken in the context of all other Saudi energy reserve estimates, but claim for the sake of debate that it is true. . In the meantime, Aramco has assumed natural gas reserves of 319.5 trillion cubic feet (TcF), according to figures released in 2019. That number had risen disconcertingly from the previous 302.3 TcF a year earlier and even more disconcerting a few years ago. it had been 233.8 TcF. Nonetheless, again, for the sake of this debate, let’s assume that this figure is also true. The plan is for Aramco to begin production from Jafurah in 2024 and reach 2.2 billion cubic feet (Bcf) per day of gas by 2036. In 2018, just ahead of the increase in gas reserve estimates and without Jafurah in production, Aramco produced approximately 8.9 Gcf / d of natural gas. With this amount of gas produced and used in Saudi Arabia‘s energy mix at that time, it was still true that between 2015 and 2018, the amount of highly polluting fuel that the Kingdom was using in the production of domestic electricity was increased from 400,000 b / d to 500,000 b / d. Richard Bronze, cross-energy analyst for global energy consultancy, Energy Aspects, in London, said OilPrice.com.

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This supposed move towards gas, in turn, was part of Saudi Arabia’s larger push to claim it was heading towards a cleaner energy agenda. A key part of this was his statements that he also aimed to comply with the International Maritime Organization (IMO) global sulfur cap for marine fuels being reduced to 0.5% instead of 3.5%, the target date for which was the end of 2020. Despite comments at that time from Saudi Aramco‘s senior vice president of downstream operations, Abdulazziz al-Judaimi, that the company’s wholly-owned refining assets were already in line with 85% at IMO, Saudi Arabia was one of the very few places in the world that imported fuel oil at that time, according to Bronze. This meant that he could legitimately – sort of – claim that he was decreasing his own production of dirty fuel oil.

The main reason for the increasing substitution of imported fuel oil for domestically produced fuel oil was location, as currently much of the fuel oil produced in Saudi Arabia is produced in areas far from populated areas where it is necessary to to burn. as fuel for the production of electricity. Therefore, it is easier and cheaper for the Saudis to import fuel oil to places where it can be easily used for power generation rather than building an expensive logistics network to move it from where it is needed. is produced in Saudi Arabia to where it is needed. This apparent inability to get fuel oil across the country is interesting to note when viewed in the context of the fact that the Saudis have succeeded in doing just that for crude oil, with its Eastern Pipeline. 746 mile west having been built in the 1980s.

For Jafurah, therefore, 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 of barrels of oil equivalent or 367,400 barrels. Therefore, the new total projected amount of gas from Jafurah is approximately 367,400 barrels per day. This amount is not even enough to cover the current volume of highly polluting fuel oil burned for power generation in Saudi Arabia, even if Aramco’s already high gas production continues. However, based on independent industry estimates on the evolution of Saudi demographics and the corollary evolution of electricity demand patterns, the Kingdom is likely to need gas production of around 23 to 25 Gcf / d over the next 15 years just to cover its own electricity and industrial demand.

By Simon Watkins for Oil chauffage

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