Login

Register

Country Reports News & Views Video Sectors Blog Interviews Shop Events Consultancy About

All 17 Sectors All 40 Countries Keywords (optional) Search

From refining to associated gas, Saudi Arabia's Register for free

product offerings thrive Economic News
Updates on Saudi
Saudi Arabia Energy Analysis Text size + - Arabia
Recommend
View in online reader
First name
Although gas production increased by more than 70% between 2003 and 2013 according to BP
figures, harnessing its potential presents a number of challenges. Saudi Arabia has no plans to export Last name
gas, seeing it as feedstock for local power, desalination and petrochemical plants in order to free up
more oil for export. Email

GAS PRODUCTION: Saudi Aramcos 2013 annual report, published in April 2014, revealed that its raw gas Register for updates
output for such plants was 4.02trn standard cu feet, the most in a single year in the companys history. The
firm also produced 455.9m barrels of natural gas liquids (NGLs), including 86.8m barrels of condensate. The
report said Saudi Aramcos gas plants were capable of processing 13.2bn standard cu feet per day (scfd).
After the companys executive committee meeting in March 2015, its then-CEO and president, Khalid Al Related Content
Falih, said Saudi Aramco had produced a record volume of gas in 2014, and discovered eight new oil and gas
fields. Featured Sectors in Saudi
Arabia:
GAS SUPPLIES: According to the US Energy Information Administration (EIA), 70% of Saudi Arabias gas Saudi Arabia Energy
output was associated with the Ghawar, Safaniya and Zuluf oilfields as recently as 2011 and 60% came from
Ghawar alone. However, the EIA suggests that significant additional boosts in production are likely to come Saudi Arabia Industry
from other parts of the country. In 2012 production began from Karan, the Kingdoms first non-associated Saudi Arabia Construction
gas field. It has a capacity of 1.8bn scfd, which is fed by a 110-km sub-sea pipeline to the Khursaniyah gas
Saudi Arabia ICT
plant and subsequently used for industrial feedstock, water desalination and electricity generation.
Saudi Arabia Transport
WASIT: In spring 2015, the Wasit gas processing facility was due to come on-stream north of Jubail. It has
been built to handle the combined 2.66bn scfd output of two other non-associated fields in the Gulf, Hasbah Featured Countries in Energy:
and Arabiyah, which are expected to produce 1.3bn scfd and 1.2bn scfd of Khuff gas, respectively. There Indonesia Energy
have been local media reports that the high sulphur content of the gas from these fields has caused some
delays in the Wasit facility coming on-line. However, Saudi Aramco says that when the plant is fully Qatar Energy
operational it will be able to supply 1.75bn scfd to customers through the Master Gas System and could UAE: Abu Dhabi Energy
potentially handle peak summer or emergency demand of 3.05bn scfd.
Ghana Energy
South Africa Energy
According to Saudi Aramcos 2013 annual report, the Karan and Wasit developments will raise the Kingdoms
gas processing capacity by about 40%. The Wasit plants fractionation (separation process) module is
designed to produce ethane, propane, butane and natural gas. The cogeneration power plant at Wasit will
produce 750 MW of power and 4200 tonnes of molten sulphur a day. The plant will be the first in the
Kingdom to use Shells Sulfinol-M gas treatment technology, raising the efficiency of sulphur recovery from
95% to 99.1%.

MIDYAN: Another key component of Saudi Aramcos non-associated gas development programme is taking
place on Saudi Arabias Red Sea coast in the Tabuk region. The Midyan field, though discovered in the 1990s,
only began to be developed in 2013. When fully operational in 2016, Midyan will be capable of producing
75m scfd of non-associated gas and 4500 bpd of condensate. Two 98-km pipelines will feed these products
to a power plant near Duba for electricity generation. Saudi Aramcos non-associated gas programme is also
designed to service a range of other industries, including the production of steel, cement, ammonia,
antifreeze, solvents and fuels.

ASSOCIATED GAS IMPROVEMENTS: The Saudi Aramco report also gives details of additional gas output from
recent developments in its oilfields. It reports that the Khurais field is producing 320m scfd and that the new
Manifa oilfield produces 90m scfd. The company has also boosted capacity at the Haradh gas plant by 8%
following improvements to its sales gas compression relief system. This gives the plant the capacity to
process an additional 150m scfd when necessary.

The company also reports significant improvements at its Shaybah oilfield, deep inside the Rub Al Khali. A
new NGL recovery plant was scheduled for completion by the end of 2014 with production capacity of
270,000 bpd. The project involved building inlet facilities, gas treatment units, NGL recovery trains, residue
and acid gas compression, NGL storage, and an upgrade of the gas-handling capacity of the four Shaybah
gas-oil separation facilities. Power generation on the site was due to be increased to more than 1 GW with
the installation of four cogeneration units, seven single-cycle units and a 50-km, 230-KV transmission line.

UNCONVENTIONAL GAS: The Rub Al Khali is one of three areas Saudi Aramco is targeting in its drive to tap its
reservoir of unconventional gas deposits of natural gas trapped in tight sands and shale. The other two are
South Ghawar and the countrys north-west. One of Saudi Aramcos key goals is large-scale expansion in
exploration and development of unconventional resources. In January 2015, former CEO and president Al
Falih told a conference in Riyadh that the company had committed $7bn to this purpose and had already
spent $3bn. He said Saudi Aramco would continue to invest $30bn-50bn a year on crude oil, gas and
petrochemical development despite the fall in oil prices.

Although the $7bn being invested in developing shale is comparatively modest, the company is following the
technological example set by the industry in the US. In its 2013 annual report the company said of shale, the
gas was not commercially viable to produce until recently but that only two years after launching its own
unconventional gas programme, it was ready to commit shale gas to a 1000-MW power plant for the Waad
Al Shamal phosphate mining and manufacturing complex being built by a subsidiary of state-owned mining
company Maaden. Saudi Arabia will be among the first countries outside North America to use shale gas for
domestic power generation, the Saudi Aramco report said. In a statement to the Saudi Stock Exchange in
July 2014 Maaden announced that the $7.5bn complex would begin production by 2016.

CHALLENGES: However, developing unconventional shale gas in Saudi Arabia faces significant challenges.
Drilling tests indicated the Kingdom may have up to 600trn cu feet of shale gas, according to local media
twice as much as BPs figure of 290.8trn cu feet for the countrys entire gas reserves. However, two of the
three sites Saudi Aramco is exploring are in remote and dry desert areas. Fracking in the US relies on the
ability to inject billions of gallons of fresh water into tight seams, but in Saudi Arabia groundwater is scarce.
Even if seawater were used, it would have to be transported to the gas fracking fields from coastal areas.
Another possibility, which has been explored in the US, is to use liquefied petroleum gas as a water
substitute.

PRICING: Another obstacle to such development is the domestic price structure for gas, which is highly
subsidised and based on the cost of extracting associated gas. According to 2013 World Bank figures cited
by the EIA, gas is sold to Saudi consumers for $0.75 per million British thermal units (Btu), well below the US
($3.75), the UK ($10.51) and Japan ($15.96). It would cost a minimum of $6 per million Btu to extract shale
gas in Saudi Arabia, rising to $10 per million in some remote areas. The economics only make sense when the
losses incurred in producing and selling unconventional gas are compared to the opportunity loss for Saudi
Arabia every time it sells a barrel of crude to a state power station for $5 to generate electricity.

A barrel of crude oil contains 5.8m Btu of energy. At $10 per million Btu, the equivalent production cost of
the most expensive equal volume of unconventional gas would be 10 x 5.8, or $58 a barrel. That $58 barrel
would be sold to a Saudi customer for $4.35 at the $0. 75-per-million Btu rate, and so the producer would
incur a loss of $53.65. If that same producer sold a barrel of crude to a Saudi power generator for $5, when it
could have been exported for $60, then an opportunity cost of $55 is incurred. The upshot is that, even at an
export price of $60 a barrel, the most uneconomical unconventional gas would still save the Saudi economy
the difference between a loss of $55 and a loss of $53.65 a barrel, or $1.35 a barrel. Those losses are far
greater when the export price of crude oil is above $60, and are higher still if the crude oil is being burned in
power stations rather than turned into refined products with an even greater export value than the crude oil
itself.

See also:World Bank, BP

Request reuse or reprint of article

Previous article from this chapter and report Next article from this chapter and report
Saudi Arabia investing in a range of upstream and Research has led to a range of alternative
downstream areas technologies and solutions

Read previous Read next

Articles from this chapter The Report

This chapter includes the following articles. Saudi Arabia 2015
This article is from the
The fall in oil prices brings fresh attention to
Energy chapter of The
the worlds largest oil exporter, Saudi Arabia Report: Saudi Arabia
2015. Explore other
Saudi Arabia investing in a range of upstream chapters from this

and downstream areas report.

Research has led to a range of alternative Explore Report

technologies and solutions

Saudi Arabia, OPECs largest oil producer,

keeps on pumping