A statement issued at the World Energy Congress in Daegu, South Korea, last week said that Saudi Arabia “is preparing to be among the first countries outside North America to use shale gas for power generation”.

The Saudi Aramco chief executive Khalid Al Falih said at the Congress: “We are ready to start producing our own shale gas and unconventional resources in various types in the next few years and deliver them to consumers.”

Saudi Arabia must have been encouraged by the success of the shale gas revolution in the US and been busy since 2011 in exploring such resources in the northern part of the country. Al Falih added: “Only two years after launching our own unconventional gas programme, in the northern region of Saudi Arabia, we are ready to commit gas for the development of a 1,000 MW power plant which will feed a massive phosphate mining and manufacturing sector.”

This is not the first time that we have such confirmation about the future availability of shale gas. Saudi oil minister Ali Al Naimi said last April that “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.”

The 600 trillion cubic feet (tcf) is more than double Saudi Arabia’s proven conventional gas reserves of 288 tcf and, therefore, when produced will make a tremendous impact on the country’s energy scene. Although Saudi Arabia produces close to 10 billion cubic feet a day (cfd) of gas, it is still short of its requirements and, therefore, the country is forced to use large volumes of crude and fuel oil in the power stations. This contributes to a sharp increase in domestic consumption and a possible reduction of future exports of crude oil if the situation is not rectified by additional gas production or the use of renewable energy and efficiency gains.

According to Aramco, gas demand may double by 2030. It was not clear until now as to where the shale gas development would be and how Aramco will solve the huge requirement of water for hydraulic fracturing, amounting to about 20,000 cubic meters per well. However, it may be possible to use sea water with some adjustment to the chemicals instead of using fresh water.

Some companies also believe that they can reuse some 90 per cent of the water required and this must be explored irrespective of whether the water is fresh or not.

 

More information needed

Surprisingly, industry literature does not yet allocate any shale gas reserves to Saudi Arabia. It is up to the kingdom to follow these announcements by disclosing more information about the drilling results for its reserves to be considered in industry literature. Perhaps, this is why some have raised doubts about Saudi aspirations; Reuters said on October 14 that “Riyadh — hampered by scarce water and prices fixed far below production costs — is unlikely to produce much shale gas this decade”.

At the industry summit in Korea, the Shell chief Peter Voser said his company would take longer than expected to realise its shale gas objectives. He said it will take decades before the revolution in the US can be replicated elsewhere in the world.

For all this, Saudi Arabia is unlikely to bet on shale gas alone and is already pursuing development in non-associated gas fields such as Karan, which was discovered in 2006 and came on stream in 2011 and expected to produce 1.8 billion cfd. The 1.2 billion cfd Arabiyah field is expected to come into production within five years and the same goes for the 1.3 billion cfd Hasbah field.

Even the Dorra field located offshore of the Saudi-Kuwait Neutral Zone may be jointly developed despite Iranian opposition over a small portion of the field that is claimed by Iran.

There is no doubt that Saudi enthusiasm for natural gas is important for the country if it wants to maintain its position in the international oil market by gearing gas to satisfy domestic energy demand and freeing crude oil and petroleum products for exports. The country already consumes about 3 million barrels a day (mbd) of crude oil and products in addition to about 1.8 mbd of gas equivalent.

Demand is rising as well. It is, therefore, important to reduce oil demand by increasing gas supply and by improving efficiency of usage. or by all of these at the same time.

 

— The writer is former head of the Energy Studies Department at the Opec Secretariat in Vienna.