I almost missed the deadline for this column because I am in a trance. Two days ago I attended the Brooklyn Melodies Music Centre’s annual concert in Dubai and I was so impressed by the performance, which carried me at least for a while from the world of oil and gas and energy. Music can instil so much energy in people especially when it is played by dedicated performers determined to reach our hearts as well as our ears. At least music energy, if there is such a thing, has infinite reserves and no one has to worry about its security or its reserves to production ratio. It is for the first time that I attended a concert where classical, jazz and Arabic melodies were performed brilliantly in succession to the satisfaction of the audience and it is a tribute to Dubai that it can have such performances. Mind you, without electricity (energy) for the lighting, sound system or the instruments, the concert may not have been so effective.
Saudi Arabia, the world’s biggest crude exporter, through its national oil company Aramco, may become the world top single refiner as well according to Khalid Al Falih, Aramco’s chief executive who recently said “in the years to come, we will become the world’s single largest oil refiner.”
Domestically, Saudi Arabia crude distillation capacity may have grown by about 400 thousand barrels a day (bd) in the last ten years to reach a capacity of 2.112 million bd. But more importantly the sophistication of the industry has grown in the sense of adding more conversion units and product quality improvement units in addition to integration with the petrochemical industries in more than one refinery. The completion of Al Jubail and Jizan refineries in the coming few years may increase Saudi domestic capacity to about 3 million bd. Saudi refineries are also busy improving products quality by reducing sulphur in gasoline and diesel and reducing benzene in gasoline to improve local environment and to maintain competitiveness in international markets.
At the same time, Al Falih said that Saudi Arabia global refining capacity may double to 8 million bd in the next ten years. Saudi Arabia owns substantial capacity in the US and China and has just finalised negotiations with Pertamina of Indonesia to build an $8 billion refinery there with a capacity of 300 thousand bd.
It looks like the “shale revolution” is coming our way. Saudi Oil Minister Ali Al Naimi said that his country will drill for shale gas this year. The technology of hydraulic fracturing and horizontal drilling has contributed to substantial increase in oil and gas production in the US and therefore encouraging other countries to follow suite if the resources are available. Saudi Arabia is currently short of gas where on average it produced 9.9 billion cubic feet a day in 2011, which is not sufficient to satisfy demand and forcing the country to use large volume of crude and fuel oil in the power stations and therefore contributing to a sharp increase in domestic consumption. Therefore any success in shale gas development and production will be important in maintaining Saudi position in the world market by reducing its crude oil consumption.
Conventional gas reserves in Saudi Arabia are estimated at 286 trillion cubic feet and unconventional reserves are much more according to the Minister when he said “this year alone we are going to test seven wells for shale. We have rough estimates of 600 trillion cubic feet of unconventional shale gas. The potential is very huge and we plan to exploit it.”
It is a fact that hydraulic fracturing requires huge amounts of water to the tune of 20000 cubic meters per well and the development is also land intensive. However, Saudi Arabia must have been encouraged by the latest development of using sea water with some adjustment to the chemicals instead of using fresh water. The land here is not a factor but one hopes that the shale resources are close to the sea. No matter what, the recycling of water must also be considered to reduce water requirement to the minimum and also prevent pollution.
Researches are underway for “dry fracturing” to eliminate water use. Gas may be used and recovered later with the produced gas. But this is a long way away from being commercial or widely developed but countries like Saudi Arabia are well advised to keep track of such development.
