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Saudi Arabia: the next country to develop shale gas

Saudi Aramco revises plans to explore shale gas

Since Saudi Arabia is struggling to increase its natural gas production to meet its fast growing demand, the national oil company Saudi Aramco investigate all potential sources of supply, onshore and offshore, conventional and unconventional.

The consumption of natural gas in Saudi Arabia is increasing very fast because of the growing population, the construction of natural gas-fired power plants and the development of the petrochemical industry.

In addition Saudi Arabia consumes 3 million barrels per day of crude oil in applications where natural gas should be used.

With the large spread between oil and gas prices, Saudi Arabia is now interested to save oil and uses gas instead.

In that respect Saudi Arabia holds the world fourth largest reserves of conventional natural gas with 267 trillion cubic feet (tcf).

Anyway to meet its development and reduce its reliance on the crude oil export market, Saudi Arabia set the target to produce additional 5 billion cubic feet per day (cfd) of natural gas within the next five years.

To find these additional 5 billion cfd of natural gasSaudi Aramco faces three potential sources of supply: the associated gas, the non-associated gas and the unconventional gas.

The associated gas production is directly related to the crude oil exploration and production, its growth cannot exceed significantly the crude oil production growth.

For the non-associated gas, Saudi Aramco has launched a large program of exploration and production, up to offshore the Red Sea, but there is no evidence that this campaign will manage to put in production these 5 billion cfd targeted in the next five years.

Saudi Aramco to explore Qusaiba shale gas deposit

The unconventional gas, such the shale gas has never been considered as an option so far because of its production cost in a subsidized gas market.

Actually the production of shale gas in Saudi Arabia is estimated around $8-9 per million btu, but there is no valid reference so far.

On the domestic side, the Saudi Government is charging customers $0.75 per million btu.

But on the same period of five years, the USA gave the example how to switch from the position of world largest importing country of natural gas to the position of net exporter with the help of the shale gas.

In addition with a market price below $3 per million btu, USA are now working on rebuilding an entire petrochemical industry able to compete with Middle East on the global markets.

In this context, the comments from Saudi Aramco CEO, Khalid al-Falih, at the last World Energy Council in Montreal, Canada, about the shale gas to boost  takes full sense. 

Depending on the sources, Saudi Arabia may hold between 447 and 645 trillion cubic feet (tcf) undeveloped reserves of natural gas in shale rocks.

On this base, Saudi Arabia would rank as the fifth largest country behind USA, China, Argentina and Mexico.

The largest identified deposit of shale gas is located in the Qusaiba Paleozoic reservoir in the Rub Al-Khalih close to the giant Ghawar oil field in the Eastern Province of Saudi Arabia.

The structure of the shale layers and the difficulties to extract the natural gas from the shale rocks are still to be evaluated.

The other uncertainty is about the water, a critical component of the shale gas fracturing techniques, which is not abundant in Saudi Arabia.

To clarify how much of this shale gas may be recovered and at which costs,  Saudi Aramco rescheduled its shale gas development program seven years ahead the previous plan and mandated the US oil fields services companies such as Halliburton or Schlumberger to work on the feasibility studies for first production tests. 

 For more information and data about oil and gas and petrochemical projects go to Project Smart Explorer

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