Shale Gas Heralds a New Era in Energy Sector

by Shamsul Huda | Jan 08, 2014

SAUDI ARABIA has turned its attention to the development of a new source of energy -- shale gas, which is to strengthen its position as a key player in the global energy supplies. This ambitious initiative for the exploration of shale gas estimated to be a deposit of over 600 trillion cubic feet, more than double of the current proven conventional reserves, will undoubtedly save more of the Kingdom’s crude oil for lucrative exports.  The Kingdom engaged itself into the unconventional gas development two years ago and continued to pursue this new energy source. Its fully-owned government company, Saudi Aramco, made its first foray into the unconventional gas arena in 2012, proving that substantial shale and tight gas deposits abundantly exist in the country. The company has continued to explore and appraise programs in three prospective areas for unconventional gas in the Kingdom: in the Northwest, South Ghawar and condensate-rich shale gas in the Rub’ al-Khali or Empty Quarter. These projects are part of its wider Unconventional Gas Initiative, which became fully operational in 2012 when multidisciplinary teams, made up of Saudi Aramco professionals and industry experts with extensive experience, began appraisal drillings.

Following the success in exploring new energy sources, Mr. Khalid Al Falih, CEO of Saudi Aramco, announced the discovery and prospective use of Saudi shale gas in the recently concluded World Energy Congress in South Korea. He said: 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. Only two years after launching our own unconventional gas program, in the northern region of Saudi Arabia, we are ready to commit gas for the development of a 1,000 megawatt power plant which will feed a massive phosphate mining and manufacturing sector.”

In the wake of recent US shale gas development which transformed the country from the largest gas importer in the world, to a potentially huge exporter, there is a possibility of exploring huge unconventional gas in the Kingdom. Saudi Arabia hopes that exploration of unconventional gas will help it reduce its huge domestic consumption of oil and natural gas currently used for power generation and desalination of water.

Saudi Arabia has abundant resources of shale gas. According to the US Energy Information Administration’s (EIA) survey of the top 10 countries with technically recoverable shale gas resources, Saudi Arabia, with 600 trillion cubic metres is ranked fifth between the US and Canada. China tops the list and has already signed production-sharing deals and awarded exploration blocks as it targets output of 6.5 billion cubic metres a year by 2015.

There are challenges for the exploration and development of shale gas in the Kingdom. Due to a scarcity of water, a vital component in hydraulic fracturing, and the prevailing natural gas prices, which are far lower than production costs, it is unlikely that Saudi Arabia will be able to produce much shale gas before the end of the decade. Oman is most likely to develop its unconventional gas reserves, with commercial production potentially starting in 2017.

Gas Demand to Double

Saudi Aramco has predicted that the country’s natural gas demand will double by 2030. To meet the growing demand, it is exploring hidden reserves of shale gas across the country. Shale gas will, at first, be used to feed a proposed power plant in Jizan, which Saudi Aramco hopes to complete by 2017. Saudi Arabia believes that using shale gas for domestic power production will help it to maintain the largest spare oil production capacity in the world, vital to protect the oil markets from changes in production output.

Saudi Aramco has identified natural gas as a valuable source of energy since 1970s.  By creating the Master Gas System, it began capturing and making good use of the gas associated with oil production. The national company is responsible for the current known gas reserves of 284.8 trillion standard cubic feet. Finding additional gas reserves is one of its top priorities, and so far its exploration program has been very successful.

The year 2012 was a milestone year for Saudi Aramco gas development. Its production in terms of raw gas to gas plants rose 8.3 percent from 2011 to 3.924 trillion standard cubic feet, the most in a single year in the company’s history. Karan Gas Field is its first non-associated gas field. Development work on the Wasit Gas Program, one of the largest gas plants Saudi Aramco has ever built, remains on schedule.

Major Achievements

Major achievements in the Saudi gas sector in 2012 included production of 10.7 billion standard cubic feet per day of gas, annual production of 3.9 trillion standard cubic feet of gas, 100 gas exploration and development wells completed, 482 million barrels of NGL production, and 2 gas fields discovered -- Sha'ur and Umm Ramil -- bringing the total oil and gas field discoveries to 116 and 13.23 billion standard cubic feet per day of gas processing capacity.

Karan & Wasit Gas Program

Karan, the first non-associated offshore gas field development, helped to boost the Kingdom’s gas production by reaching its full peak production capacity of 1.8 billion scfd. Another key achievement of this program is its operational safety record. When completed, Saudi Aramco’s Wasit Gas Plant will be one of the largest gas plants along with Karan. It will raise the Kingdom’s gas processing capacity by about 40 percent. As a stand-alone gas plant, its integrated facilities will process 2.5 billion scfd of non-associated gas from the offshore fields of Arabiyah and Hasbah. Under normal conditions, Wasit is expected to supply 1.75 billion scfd of sales gas, though the two offshore fields have a production potential of up to 3.05 billion scfd of raw gas during emergencies or demand peaks.

Demand Forecast

Total demand for natural gas apart from gas liquids and ethane is expected to exceed 7,768 million standard cubic feet per day by the end of 2014, according to the Kingdom’s 9th Five-year Development Plan. The bulk of the sales gas is being used as fuel in the electricity, water, oil and gas and manufacturing industries, while consumption of ethane and natural gas liquids will be limited to only the manufacturing sector as feedstock.

Electricity production consumes most of the natural gas. In 2014, gas consumption in this sector is estimated at 3,921 million standard cubic feet per day. In 2013, it was expected to reach 3,858 million standard cubic feet per day, followed by 3,797 million standard cubic feet per day in 2012 and 3,520 million standard cubic feet per day in 2011. 

The manufacturing sector is set to use more than 2,422 million standard cubic feet per day in 2014. This sector used, according to the 9th Development Plan, 2,396 million standard cubic feet per day in 2013 and 2,422 million standard cubic feet per day in 2012. Manufacturing industries also consumed 2,261 million standard cubic feet per day in 2010, followed by 2,139 million standard cubic feet per day in 2010.

The oil and gas sector also consumes a significant volume of natural gas. Sales gas in this sector is expected to amount to 1,425 million standard cubic feet per day in 2014. In 2013, sales gas consumption in oil and gas industries was estimated at 1,414 million standard cubic feet per day, followed by 1,412 million standard cubic feet per day in 2012 and 1,255 million standard cubic feet per day in 2011. Demand for natural gas products for use as fuel or as a feedstock in industry, such as sales gas, ethane, and natural gas liquids, is set to grow at an average annual rate of more than 4.3 percent over the period of the 9th Development Plan stretching from 2009 to 2014.


Ethane is only used in the manufacturing industries. In 2014, consumption of ethane is poised to exceed 1,039 million standard cubic feet per day. In 2013, the Saudi manufacturing sector was expected to use 1,037 million standard cubic feet per day followed by 1,025 million standard cubic feet per day in 2012 and 1,007 million standard cubic feet per day in 2011.

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