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Saudi awaits accurate estimate of unconventional gas resources
By Kevin Godier
Saudi Aramco remains positive that its unconventional gas resources
are both huge and useable, but will need another two years or so to pin
down an accurate recoverable reserves figure and form a commercial
production plan, according to recent remarks by its leading executive.
Non-conventional gas nevertheless “has a place in the energy mix” in
order to reduce the burning of valuable crude oil for power generation,
said Aramco’s chief executive Khalid al-Faleh, in an interview last
week with Platts and two other publications.
Last year, al-Faleh indicated that Saudi Arabia could hold hundreds
of trillions of cubic feet of shale gas, more than doubling its proven
reserves of conventional gas, which total 280 trillion cubic feet (7.9
trillion cubic metres).
In the interview, al-Faleh said that although the world’s largest oil
exporter had “conceptual estimates” of its tight and shale gas
reserves, it would not book recoverable reserves until it completed an
assessment of its unconventional gas resources.
Of course, there remains plenty of output capacity on the
conventional oil and gas side, said al-Faleh, highlighting that
Aramco’s sustainable production capacity would rise to a nominally huge
12.9 million bpd once the Manifa heavy oilfield development was
But domestic demand for energy is now rising rapidly in Saudi Arabia
– as it is in other GCC markets to meet the demands of growing
economies and populations – and consumption across the kingdom’s
industry and domestic households is now in the range of 4 million
barrels of oil equivalent (boe) per day, according to al-Faleh.
Other Aramco officials have predicted that Saudi Arabia may need to
burn as much as 3 million bpd of oil by 2020 just to generate power if
it fails to improve its energy efficiency, which would lift the average
of about 500,000 boe currently used by the kingdom’s power plants by
Thus, Aramco has been keen to seek alternative sources of energy,
and has targeted natural gas production of 15.5 bcf (439 mcm) per day
of gas by 2015, some of this to be drawn from the world’s fourth
largest reserves of natural gas.
Aramco has been developing its first non-associated gas field, the
offshore Karan field, while also working with foreign partners,
including Shell, on a gas exploration programme.
However, production costs have been a major preventative factor in a
long-touted aim of developing the country’s large-scale unconventional
gas resources, Amin Nasser, senior vice president for upstream at the
company, indicated in early October.
Nasser was reported as saying that while a number of evaluation
projects were under way, commercial production would remain unlikely
until the cost of extraction could be reduced further to align more
closely with Saudi Arabia’s fixed price system, which is currently set
at US$0.75 per million British thermal units, well below the cost of
extracting unconventional reserves.
“Hopefully, with the right technology development, we can make it
affordable,” he said.
In the recent interview, al-Faleh echoed some of this theme.
He emphasised that to expand gas production further “will take a lot of
investment and non-conventional gas will be certainly a lot more
expensive than the gas we have produced in the past – both associated
and even the expensive conventional non-associated gas that we have
brought on stream, like the increments we are bringing now from
He was quoted as saying: “Unconventional gas will be generally more
expensive than those increments. But still, when considering the
alternative of burning valuable liquids like crude oil and condensates,
non-conventional gas will compete.”
Assessment the key
Al-Faleh underlined that no major commercial production of shale gas
was likely to take place until a recoverable reserves figure was
“It will take a couple of years of intensive exploration and perhaps
piloted production of this type of resources before we tell with
certainty how much reserves we have and when we will be able to bring
them to market,” he said in the interview.
He continued: “At this stage, I would just caution it is still
estimates of resources, conceptual in nature. I have mentioned before
that our resource base is in the hundreds of tcfs. Hundreds can become
smaller if you go with P90, the 90% probability. On the other hand, it
will be much larger if you used P10 figures, and something in the range
of 200 to 300 tcf if you are looking at the mean estimate,” he was
quoted as saying.
Asked whether Aramco might bring in a foreign partner for reserves
assessment work, al-Faleh replied: “As of now, we are not going to
bring in anybody. Saudi Aramco is in the process of undertaking this
exploration work on our own.” Aramco said in its 2010 annual review
that it was looking for unconventional gas trapped in shale rock and
impermeable sandstone in the country’s northwest and in the area of the
Ghawar field, where gas infrastructure exists.
Brian Gratto, manager for exploration resource assessment at the
company, underscored in mid-May that the firm was particularly keen to
find ways to use less of its valuable crude as fuel for power stations.
Aramco wants to add 5 bcfd (141.5 mcmd), said Gratto, adding that the
plan was to start with small-scale shale and tight gas recovery of
about 300 mcfd (8.5 mcmd), before raising this to hit the larger
“This is not something that Aramco wants to do over 10 years or more
because by then we would have burned more crude oil at power stations
that we could sell abroad for higher gains,” he was quoted as saying by
Saudi observers will have taken a special interest in the details
which al-Faleh provided concerning the volumes of crude oil used for
power generation in the kingdom, not least that the Aramco head has
warned previously that sustained high consumption will impact future
crude oil export volumes.
Furthermore, data on this aspect of Saudi Arabia’s economy have been
varied, to some extent because there is a major seasonal variation, and
the total is far higher during the country’s hot summer months.
“I have seen 900,000 bpd and 1 million bpd, which are absolutely
incorrect,” al-Faleh was quoted as saying.
“I believe 500,000 bpd is in the range of the annual average crude oil
being burned for power generation,” he noted. Al-Faleh continued:
“Today if you look at our total energy consumption, it is in the range
of 4 million boepd, give or take a couple of hundred thousand. About
50% of it is gas-based. This includes feedstock into petrochemicals:
some of it is LPG; some of it is ethane; some of it is natural petrol
which is a form of naphtha, but it is all derived from gas.” Faleh
pointed out that, of the other 2 million boepd, “a lot of it goes into
refined products and there is the 500,000 bpd of crude that goes into
The Aramco CEO has in the recent past cautioned that this consumption
aggregate could roughly double by 2030 to 8.2 million bpd. “If we do
not introduce efficiency measures, if we do not sharpen our consumption
pattern, if we do not substitute different energy sources, if
renewables do not make a dent in our energy mix, that will be the
outcome,” he reiterated.
To consume such a figure for domestic purposes “will be extremely
inefficient in terms of converting energy input into economic output”,
Al-Faleh confirmed that the state-owned giant intended to relax
production from some of its older reservoirs to achieve maximum
recovery rates, playing down the nominal 12.9 million bpd production
capacity that will be available once the Manifa heavy oilfield
development – the last of Saudi Aramco’s planned capacity expansion
projects – is complete.
“When Manifa comes on stream, if we continue producing all of those
reservoirs at the same rate, we will have 12.9 million bpd. But we are
not going to do that. Once we do it, we will introduce reservoir
management restrictions to relax those fields, because we are aiming
for later in this century and beyond to be able to achieve our maximum
reservoir recovery,” he was quoted as saying.