OIL AND GAS

SAUDI PRESSES ACCELERATOR ON NATURAL GAS PRODUCTION

Saudi Arabia’s natural gas production is on a rapid acceleration drive

The country’s daily gas processing capacity has surged from 2 billion standard cubic feet per day (scfd) in 2000 to around 18 billion scfd in 2022.

Saudi Aramco plans to further expand the gas business, including hastening the development of the kingdom’s unconventional gas resources, to help meet the large and growing domestic demand for lower-cost, lower-carbon energy.

The company’s gas processing facilities include Berri, Fadhili, Haradh, Hawiyah, Khursaniayah, Midyan, Shedgum, Shaybah, Uthamaniyah, Wasit, and North Arabia.

In its latest annual report, Aramco said compression projects at the Haradh and Hawiyah fields commenced commissioning activities and full capacity is expected to be reached in 2023.

“Construction at the Hawiyah Unayzah Gas Reservoir Storage, the first underground natural gas storage project in the kingdom, is at an advanced stage and has commenced injection activities,” Aramco stated. The programme is designed to provide up to 2 billion scfd of natural gas for reintroduction into the kingdom’s Master Gas System by 2024.

It is part of a major effort to invest in the country’s gas and wider hydrocarbons sector.

“Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of underinvestment in our industry are real - including contributing to higher energy prices,” according to Aramco. “To leverage our unique advantages at scale and be part of the global solution, Aramco has embarked on the largest capital spending programme in its history, and last year our capex rose by 18.0% to reach USD 37.6 billion.”

Strong oil and gas revenues helped Aramco report a record net income of USD 161.1 billion - its highest annual profits as a listed company.

 

Latest available data from the General Authority for Statistics (GASTAT) shows natural gas reserves rose 0.91% in 2021 compared to 2020, reaching 8,293 million tonnes of oil equivalent (mtoe). Natural gas production reached 126 mtoe, rising by 2.94% compared to 2020.

Total consumption of natural gas rose 1.32% compared to 2020, to 99.21 mtoe.

In 2021, total production of liquefied petroleum gas rose 9.31% to reach 1.36 mtoe, while total consumption rose 0.24% to 1.65 mtoe.

“Gasoline production increased by 19.19%, reaching 25.02 mtoe compared to 2020, and gasoline consumption increased by 5.22% compared to 2020, reaching 22.05 mtoe,” GASTAT stated. “Gas oil/diesel increased in production as well as consumption. Production amounted to 58.26 mtoe, increasing by 12.64% compared to 2020, while consumption increased by 2.05%, amounting to 26.28 mtoe.”

Per capita consumption of LPG also rose to 81.98 litres in 2021, versus 79.68 litres in 2020. In addition, gasoline per capita consumption shot up 8% to 816 litres in 2021 compared to the previous year.

The strong growth production and consumption levels has caught the eye of global investors. In 2021, Aramco struck a USD 15.5 billion lease and leaseback deal involving its gas pipeline network with a consortium led by BlackRock Real Assets and Hassana Investment Company, the investment management arm of the General Organization for Social Insurance (GOSI) in Saudi Arabia.

The transaction will involve the formation of Aramco Gas Pipelines Company (AGPC), in which Aramco owns a 51% majority stake while investors led by BlackRock and Hassana hold a 49% stake. AGPC will lease usage rights in Aramco’s gas pipelines network and lease them back to Aramco for a 20-year period. In return, APGC will receive a tariff payable by Aramco for the gas products that will flow through the network, backed by minimum commitments on throughput.

 

The kingdom plans to raise natural gas production from its unconventional gas resources. Often called tight gas or shale gas, Aramco is exploring, running pilot projects, and putting in place the infrastructure required to access new unconventional reserves in fields such as North Arabia, South Ghawar, and Jafurah. 

Jafurah, the largest unconventional gas field in the country, has an estimated 200 trillion standard cubic feet of gas, and expected to produce 420 million scfd of ethane and around 630,000 barrels per day of gas liquids and condensates - to be used as feedstock for the petrochemicals industry.

“Our investment in developing Jafurah is likely to amount to more than USD 100 billion. And it’s hoped that the growing and evolving unconventional gas programme at these three fields alone - Jafurah, North Arabia, and South Ghawar - could help provide lower-cost and lower-carbon energy, while generating many direct and indirect jobs for the local economy,” Aramco stated.

The company believes peak production from the unconventional gas will displace around 500,000 barrels of crude oil per day, with Jafurah alone expected to displace more than 300,000 barrels of oil per day.