OIL AND GAS

 

Saudi Arabia is hoping to tap 200 trillion standard cubic feet of natural gas in the Jafurah Basin, located east of Ghawar in Saudi Arabia's eastern province, 300 kilometres south of Dammam.

If authorities are able to exploit the reserve, it will transform Saudi Arabia into one of the world’s largest natural gas producers. Currently, the kingdom is the eighth largest producer in the world behind the United States, Russia, Iran, China, Qatar, Canada, and Australia, according to Statista

The Jafurah shale play could be a game-changer for the country.Covering an area of 17,000 square kilometres, production at the facility is expected to ramp up from 200 million standard cubic feet per day (scfd) in 2025 to a sustainable gas rate of two billion scfd of sales gas by 2030, with 418 million scfd of ethane and around 630,000 barrels per day (bpd) of gas liquids and condensates, which are essential feedstock for thegrowing petrochemicals industry, according to Saudi Aramco.

In November, Aramco awarded 16 subsurface and engineering, procurement and construction (EPC) contracts worth USD 10 billion, with capital expenditure at Jafurah expected to reach USD 68 billion over the first 10 years of development.
              

ALTERNATIVE TO OIL

“It is a significant milestone both for the commercialisation of unconventional resources in Saudi Arabia and the expansion of Aramco’s integrated gas portfolio, which will provide additional feedstock to support growth of the company’s high-value chemicals business,complement its focus on low-carbon hydrogen production, and help reduce emissions in the domestic power sector by providing a cleaner-burning alternative to liquid fuel,” Aramco said.

The country’s unconventional gas programme is expected to replace around half a million barrels of crude oil per day, which would otherwise have been used for domestic consumption. The Jafurah gas development alone is expected to replace more than 300,000 barrels of crude oil per day at peak production.

“The development of Jafurah is a game-changer for our Unconventional Resources programme. It will be one of the most modern, cost-efficient shale development schemes in the industry and observe the highest environmental and safety standards,” said Nasir K. Al-Naimi, Aramco’s upstream senior vice president.

Jafurah will help the company realise its ambition of maximising the country’s abundant natural reserves, and accelerating the exploration of new fields and re-evaluation of existing ones.

It will also help Aramco “evaluate potential joint investment opportunities in both natural gas and natural gas liquids as we pursue our goal of developing an integrated global gas portfolio to meet long-term energy and petrochemicals demand.”
              

The outlook for energy prices look promising in 2022, despite fears of Omicron dampening demand in the short term. OPEC left its outlook for global oil demand this year unchanged to 100.6 million bpd, compared to 96.63 million bpd in 2021. Demand has recovered from the 90.98 million bpd levels seen in 2020.

“This is in addition to a steady economic outlook in both the advanced and emerging economies, despite current inflation and supply chain bottlenecks, ongoing trade issues and their impact on industrial and transportation fuel requirements,” OPEC said in its December report.

On a longer-term basis, the global industry is also warning that a lack of investments in the oil and gas sector over the next few decades could lead to market dislocations. Upstream capex fell by more than 50% between 2014 and 2021, from USD 700 billion to USD 300 billion.

“Consequently, supplies have started to lag. This is also hurting spare oil production capacity, which is declining sharply. Yet this is happening against the backdrop of healthy demand growth,” Amin H. Nasser, Saudi Aramco president and CEO, said during a speech to the World Petroleum Council Congress in 2021. “Second, the rest of the world will not transition at the same speed as the developed world.”

Cumulative oil-related investment requirements amount to USD 11.8 trillion in the 2021-2045 period. Of this, 80%, or USD 9.2 trillion is in the upstream, with another USD 1.5 trillion and USD 1.1 trillion needed in the downstream and midstream, respectively.

“And creating an investment-friendly climate through oil market stability has been one of the objectives of the ‘Declaration of Cooperation’ between OPEC and 10 non-OPEC producing countries,” Mohammad Sanusi Barkindo, OPEC secretary general, told an investor conference in Dakara, Senegal, in December.