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Page added on August 30, 2014
Saudi Aramco will spend $3 billion on shale gas development
Four companies have expressed interest in bidding for work on unconventional gas in Saudi Arabia as the world’s top oil exporter pushes ahead with plans to develop challenging shale deposits, industry sources said.
The companies are South Korea’s GS Engineering and Construction, Italy’s Maire Tecnimont, Japan’s JGC and Canada’s SNC-Lavalin, the sources told Reuters.
State-run Saudi Aramco’s project will involve building processing facilities, wellheads and pipelines for the gas in Turaif in the northern part of Saudi Arabia where the big mining project Waad al-Shamal is under development, the sources said.
Saudi Aramco, SNC-Lavalin, JGC and GS declined to comment, while Maire Tecnimont was not available for comment.
The search for gas has been a priority for Saudi Arabia as it struggles to keep pace with rapidly rising domestic demand.
Aramco plans to produce as much as 200 million cubic feet per day of unconventional natural gas by 2018 to supply the Waad al-Shamal project and a power plant.
Inspired by a shale gas surge in the United States, which has transformed it from the world’s largest gas importer to an exporter, Saudi has begun investigating its large unconventional gas reserves.
The kingdom has made appraisals in the northwest area, the Eastern Province and in the Empty Quarter, but the hunt is yet to prove fruitful.
Saudi Arabia, which holds the world’s fifth-largest proven reserves of gas, expects domestic demand for natural gas – which it uses mainly for power generation – almost to double by 2030 from 2011 levels of 3.5 trillion cubic feet per year.
Saudi Oil Minister Ali al-Naimi had estimated the country’s unconventional gas reserves – those held in reservoirs that have not been traditionally exploited – at over 600 trillion cubic feet, more than double its proven conventional reserves.
Aramco Chief Executive Khalid al-Falih has said Riyadh will spend $3 billion on shale gas development in the kingdom but has given no details on the investment.
16 Comments on "Saudi Aramco will spend $3 billion on shale gas development"
JuanP on Sat, 30th Aug 2014 8:56 am
There is only one possible reason for KSA to go after shale gas: they have met limits in crude production increases, as their declining oil exports these last years implied!
bobinget on Sat, 30th Aug 2014 9:32 am
Reasonably, there is another reason.
What ever oil not burned domestically is exported.
rockman on Sat, 30th Aug 2014 10:15 am
“…a shale gas surge in the United States, which has transformed it from the world’s largest gas importer to an exporter…” Absolute intentional misleading statement IMHO. First, the US was exporting some NG long before the shale boom. And second, more important, the US is still a net NG importer. The US also exports some LNG but we are still a net LNG importer.
And their own expectations? “Aramco plans to produce as much as 200 million cubic feet per day of unconventional natural gas by 2018”. That’s a very insignificant amount of production by any standard. That amount is 0.7% of current US shale gas production. And the plan to spend $3 billion to develop their shales? That would represent 300 completed wells…at most. This would barely stand as pilot project let alone a “development program”.
IMHO the KSA isn’t indicating any significant interest/expectations in their shale gas potential. Given the fact that they burn a significant volume of their oil production (instead of selling it for many $billions) for electricity generation and desalination one would expect them to invest much heavier in their shales. Given the KSA understands it’s shale potential better then anyone else this may be the best indication of that potential…or lack thereof.
Plantagenet on Sat, 30th Aug 2014 11:28 am
As Ghawar peaks, it is smart for KSA to begin fracking shales..
JuanP on Sat, 30th Aug 2014 7:21 pm
Thanks, Rock. I hadn’t realized what a small project this was. I am always amazed at KSA’s burning of oil to provide electricity to desalinate water for millions in the middle of the friggin’ desert. What a waste of precious resources. What a @&$$@& up world we live in.
toolpush on Sat, 30th Aug 2014 8:07 pm
Also to put things in perspective, off Sakhalin Is, the wells we were putting online were doing 350 mmscf/d. Yeah they were big wells but little old Qatar would be doing nearly the same just down the road, but apparently Saudi and Qatar are not on talking terms. The logical thing for Saudi’s to do until/if they get their gas situation sorted, would be to pipeline heaps of cheap Qatari gas into the country and export their oil.
Makati1 on Sat, 30th Aug 2014 8:22 pm
RIGPORN…
Nony on Sat, 30th Aug 2014 9:24 pm
Maybe they have so much cheap oil that they don’t need gas for power. IOW, Ghawar is not watering out and they just constrain the supply to run the price up. I know…crazy thought that someone would try to manipulate oil price. 😉
toolpush on Sun, 31st Aug 2014 1:06 am
Nony,
You are always good for entertainment value. You certainly do lighten the place up from some of the gloom and doom that can surround this place.
Makati1 on Mon, 1st Sep 2014 3:12 am
JuanP, perhaps the Saudi kings value their lives? Oil, and the benefits/luxuries it provides, is ALL that keeps them in power/alive. Those will be provided as long as possible at any cost. Even water at $5 per glass.
JuanP on Mon, 1st Sep 2014 8:38 am
I agree, Mak. This is the way it is and it won’t get better. I think we will do everything we can, no matter the costs, to keep the appearance of BAU up for as long as possible. Bottled water is as expensive as Diesel, and everybody here buys it every day like nothing. Isn’t that cray?
Nony on Mon, 1st Sep 2014 9:47 am
bottled water is the never-ending pet rock. I drink tap. Tastes fine to me.
rockman on Mon, 1st Sep 2014 9:53 am
Juan – “Bottled water is as expensive as Diesel”. You either have some very expensive motor fuel or some really cheap bottled water. Last time I saw the stat bottled water was selling for about 10X the price per bbl. Of course most don’t drink as much as they drive.
But I’m sure desalination produces water much cheaper than the bottled stuff runs. I suspect one of the bigger obstacles to switching from oil to NG is the transport system. Unlike the US that has hundred of thousands of miles of NG pipelines it would take a lot more capex then just drilling well.
JuanP on Mon, 1st Sep 2014 10:17 am
Rock, more expensive. I agree. I drink it, too. But I find the fact that people drink bottled water that is more expensive than oil mindblowing. It is something I can’t reconcile my mind with. It just makes no sense.
The transport in the dessert issue has to be a big part of the NG problem in KSA.
JuanP on Mon, 1st Sep 2014 10:19 am
I was talking about the sand in the desert, not the cake I’m eating. 😉
martbruj on Wed, 7th Jan 2015 9:07 pm
The dirty secret is that gas shale drilling in KSA is a disaster. The potential is quite low. Companies such as Baker have tremendously over estimated the reserve potential to land lucrative contracts.
Shales have little remaining potential and the ability to hydraulically frac same is very difficult.
One reason Shell and other IOC’s gave up,