Saudi Aramco to invest billions to expand natural gas production
Washington - While recent headlines focused on Saudi Arabia’s domestic and external political dramas, Saudi Aramco demonstrated it is business as usual in the Gulf state. It recently signed several energy development deals with foreign firms in its drive to meet one of the early target goals spelled out in the Saudi government’s National Transformation Programme (NTP).
Saudi Aramco officials signed $4.5 billion worth of agreements with international contractors for projects largely targeting expansion of the kingdom’s natural gas production.
Boosting Saudi Arabia’s natural gas production from 12 billion cubic feet per day (Bcf/d) to 17.8 Bcf/d by 2020 is a significant goal of the NTP. The kingdom wants to replace large volumes of crude that are used to help fire electricity plants with greater gas feeds as domestic power demand quickly grows. Higher gas volumes could serve as feedstock to the kingdom’s industrial base, including its valued petrochemical industry.
During last summer’s peak electricity consumption, Saudi Arabia’s direct crude burn used to fire the kingdom’s power plants averaged around 700,000 barrels per day (bpd). Thanks to new gas processing plants brought on line in June 2016, this was an improvement from previous years when Saudi direct crude burn was as high as 900,000 bpd. The Saudi government would prefer crude be exported instead, which is why there is the push to develop natural gas resources.
Saudi Aramco CEO Amin Nasser said in March 2016 that his company planned to nearly double its gas production to 23 Bcf/d in ten years through efforts to develop gas fields not associated with oil-producing fields. In 2012 Saudi Aramco’s first non-associated gas field at Karan became operational.
Nasser recently announced that Aramco would dedicate nearly $300 billion over ten years to upstream oil and gas projects. In July 2016, the company began work on its mega gas project at the non-associated Fadhili gas field west of Jubail in the Eastern Province.
The Fadhili project is expected to have a key role in the kingdom’s master gas system with a plant processing gas from both onshore and offshore fields. Combined with major gas projects in the works at the Wasit and Midyan fields, the Fadhili project will provide an additional 5 Bcf/d of non-associated gas processing capacity by the end of 2019.
The deals that Saudi Aramco signed with international firms cover both oil and gas development but the priority is boosting natural gas production. An agreement between the Saudi firm and Spanish engineering company Tecnicas Reunidas is for the construction of gas compression plants for the Hawiyah and Haradh associated gas fields to extend plateau production for both fields for 20 years. This project is expected to boost the kingdom’s gas production capacity by 1.3 Bcf/d.
Saudi Aramco awarded a contract to Italian firm Saipem to expand capacity at the Hawiyah gas processing plant by 1.3 Bcf/d, with the facility to have total processing capacity of nearly 3.8 Bcf/d by June 2021. Another project was awarded to China Petroleum Pipelines to lay 450km of gas pipelines by early 2019 to transport 290 million cubic feet per day of gas from the Haradh field to the gas processing plant at Hawiyah.
“These new supplies [of natural gas] will help reduce domestic reliance on liquid fuels for power generation, enable increased liquids exports, provide feedstock to petrochemical industries and reduce carbon emissions,” Nasser said.
Other deals signed by Saudi Aramco on November 9 included specific oil field work. The Saudis awarded American firm Jacobs Engineering with a preliminary engineering and project management services agreement for building a processing plant to accommodate 600,000 bpd of heavy crude production from the giant offshore Zuluf field. Abu Dhabi-based National Petroleum Construction Company and US firm McDermott International were awarded contracts for work on the nearby offshore Safaniya field.
However, Nasser said, those projects are not intended to boost the kingdom’s overall maximum crude production capacity beyond its current 12 million bpd but rather to help maintain production at the fields.
While the Saudi government must invest heavily to ramp up its natural gas production capacity by tapping non-associated gas fields, the pay-off should be worth it as it replaces crude with gas in fuelling its power plants.
In an October 2016 report written by Jadwa Investment titled “Natural Gas and the Vision 2030,” the Saudi investment management firm argued that the kingdom could save $71 for every barrel of crude oil substituted by a barrel of equivalent of gas in electricity generation in 2030.