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Saudi gas drive goes unconventional

Aramco’s gas development is stepping up a gear after several false starts

Saudi Arabia's need to find fresh domestic gas sources came to global attention as long as two decades ago, when majors were offered a unique opportunity to establish a direct presence on the kingdom's hallowed soil to search for the resource in the barren Empty Quarter. The much-hyped ‘Gas Initiative’ ended, though, in failure. 

Claims eight years ago that newly discovered reserves off the Red Sea coast had the potential to solve the looming gas supply crunch proved equally unfounded. Undeterred, state oil behemoth Saudi Aramco is now pinning a declared ambition to more than double overall gas production heavily on the complex and costly development of unconventional reserves. 

The firm announced back in 2013 that three major shale gas deposits had been identified—at Turaif in the Northern Borders province, at South Ghawar near the eponymous supergiant oilfield and in the Jafurah Basin to the east. For several years, plans to develop the resource appeared set to be another damp squib, as a prolonged oil price slump precluded such costly outlays. 

But, as energy prices gradually recovered from 2017 onwards, the first unconventional development project took shape in the north—extracting tight gas from the Turaif deposit to feed a new power station at the nearby Waad al-Shamal industrial city, and thereby solving the problem of the latter lacking a connection to Aramco’s cross-country Master Gas System distribution network. Japan’s JGC Corporation and Canada’s SNC-Lavalin carried out the engineering, procurement and construction (EPC) contracts respectively for the first and second phases of the gas system, which reached full 190mn ft³/d capacity in late 2018. 

Aramco’s attention has now turned to a far larger project, expected to cost some $3.5bn, to tap the Jafurah resource—which the company bills as comparable in size to the US Eagle Ford shale play, with potential reserves of more than 600tn ft³. Adding to the allure is the high liquids content of the gas and thus the potential fillip to the local petrochemicals sector—the historically gas-based growth of which has been a hindered for a decade by the national shortage and the government’s prioritisation of meeting the kingdom’s fast-growing power generation requirements. 

Aramco’s attention has now turned to a far larger project, with potential reserves of more than 600tn ft³

The raw gas extracted will feed a greenfield 2.5bn ft³/d gas processing plant nearby, while the natural gas liquids (NGLs) are reportedly envisaged being piped north to the existing Wasit gas complex near Jubail—itself a landmark, commissioned in 2016 to handle the output from Aramco’s first development of offshore non-associated gas. 

Contracting is under way for the two main EPC packages—covering the compression facilities and the processing plant—on the gas project itself while developer bids are due in March for the associated 270-320MW steam and power project. The shortage, in a desert region, of the large volumes of freshwater required for hydraulic fracturing is to be overcome through construction of a captive desalination facility. 

The Jafurah development is scheduled for completion in 2023—in time to contribute to Aramco’s stated aim to raise total gas production to 23bn ft³/d by mid-decade and that from unconventional sources to 3bn ft³/d by 2030. Overall gross production in 2018 stood at about 12.5bn ft³/d, processed into 8.9bn ft³/d of sales gas. According to the prospectus released in November ahead of the company’s IPO, trial production to assess the potential of the South Ghawar source rock and tight gas reservoirs is ongoing. In late January, the UK’s Wood Group received a two-year extension to a contract originally inked in 2014 to provide engineering services across the unconventional programme. 

Work has also been stepped up over the past three years to increase conventional gas exploitation. A current flagship project to add 300,000bl/d of crude production capacity at the giant Marjan offshore oilfield encompasses a new 2.5bn ft³/d gas plant and facilities to produce 360,000bl/d of NGLs, while the main contracts were awarded in 2017 on a multi-billion-dollar gas compression scheme to increase processing capacity at Ghawar’s southernmost Hawiyah and Haradh production zones, including a 1.1bn-ft³/d expansion of the existing Hawiyah gas plant. 

A recent contract award highlighted more directly the tightness of the kingdom’s gas supply-demand balance: in late January, South Korea’s Samsung Engineering was issued with a letter of intent for the $1.85bn EPC package on the so-called Hawiyah Unayzah Gas Reservoir Storage Project—entailing the installation of facilities for the injection of 1.5bn ft³/d of surplus gas into the Hawiyah field and the withdrawal of up to 2bn ft³/d as required during periods of peak demand, typically during the summer. The need for more storage capacity is a significant red flag for the possibility, floated last year by Aramco’s chief executive officer Amin Nasser, that the kingdom could become a gas exporter by the end of the decade.

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