Saudi gas development is back on track

Saudi natural gas reserves were estimated at some 6.75 trillion cubic metres in 2003 about 5.2% of known world reserves according to OPEC statistics. Present national gas reserves are 220 trillion cubic feet of which 85 trillion cubic feet is non-associated.

Saudi Arabia is one of the most promising areas in the world for gas exploration with the government keen to ease the path into the Kingdom for foreign direct investment in both the sector upstream and downstream opportunities.

A number of the upstream gas developments planned under the original natural gas initiative are now going ahead on a restructured basis with a wider spectrum of international players involved.

The re-launched Saudi Gas Initiative has seen Royal Dutch Shell and TotalElfFina finalise an exploration and development agreement for the Shaybah gas project concession covering 200,000 square kilometres in the Kingdom’s vast Rub al Khali desert wilderness.

Each of the oil firms has a 40% stake and Saudi Aramco a 20% shareholding in a $2.5 billion joint venture known as the South Rub Al Khali Company.

Russia’s Lukoil and China’s Sinopec together have an 80% shareholding in a 29,000 square kilometre concession in the same region while Italy’s ENI has a 50% share and Spain’s Repsol-YPF 30% of another 52,000 square kilometres concession.

$20 billion investment

The various projects are expected to result in investments worth $20 billion over five years. The focus of the various projects is the discovery and processing of gas not associated with oil extraction.

Saudi Aramco presently operates the Kingdom’s Master Gas System which collects gas produced nationwide for re-injection or for processing into ethane, propane, butane and methane and distribution for the petrochemicals, energy and desalination sectors.

Expansion work at the Hawiyah-2 plant, 160 km south of Dhahran, will raise processing capacity from 1.6 billion cubic feet a day to 4 billion cu ft/d. The Khusaniyah oil and gas facility to be built near Jubail will add further processing capacity of about 1 billion cu ft/d when completed.

However, non-associated gas development is an aim because it guarantees the use of gas independent of any fluctuations in oil production and prices. Using natural gas rather than oil for powering electricity generating and desalination plants will also make additional crude available for export.

As the new projects come on stream, the Kingdom’s production of associated and non-associated gas is expected to reach 10 billion cubic feet-a-day by 2010 from 7 billion cubic feet-a-day now.

The country needs increasing amounts of natural gas to feed its fast expanding petrochemicals industry and in the future the Kingdom’s planned new fertiliser plants and to power an integrated aluminium industry.

Petroleum and Mineral Resources Minister Ali Al-Naimi sees the gas sector investments as vital in providing more jobs and contributing to the diversification of the Kingdom’s industrial base as well as boosting the role of the private sector.