Saudi Aramco looks to expand shale gas production
WASHINGTON - Saudi Aramco has turned to US oilfield services giant Halliburton to assist in exploring and exploiting the Gulf country’s shale gas potential and develop unconventional energy resources to meet Saudi Arabia’s increasing energy demand and free crude oil reserves used in generating electricity and water desalination.
Saudi Aramco initiated an unconventional gas programme seven years ago and reportedly recently began producing shale gas from one location and is exploring in the North Arabia basin, the South Ghawar basin and the Jafurah basin.
In signing a 3-year “unconventional gas stimulation services” contract with Halliburton, Saudi Aramco aligned itself with a Western company recognised as a leader in hydraulic fracturing — “fracking” — and drilling technology and expertise that helped the US shale boom. Riyadh is banking on Halliburton’s wealth of knowledge and skillset to provide the kingdom with a shale bonanza.
Halliburton said it would provide project management, testing services and hydraulic fracturing at three sites in the kingdom.
Saudi Aramco Senior Vice-President of Upstream Mohammed al-Qahtani, in a release, said: “We believe Halliburton will work best with Saudi Aramco to help in our pursuit of unconventional gas to serve domestic needs, offset local crude burning, provide feedstock for chemical industry development and spur regional economic development in line with [Saudi] Vision 2030, the kingdom’s national transformation programme.”
In 2013, then Saudi Oil Minister Ali al-Naimi said the kingdom had “estimates of more than 600 trillion cubic feet (Tcf) of unconventional and shale gas so the potential is very huge and we plan to exploit it.”
US oilfield services company Baker Hughes projected that Saudi Arabia has recoverable shale gas reserves of 645 Tcf, which would give the kingdom the fifth largest shale gas deposits in the world. Saudi Aramco has conventional gas reserves of 298.7 Tcf, so the ability to harness the kingdom’s shale gas potential cost-effectively could be a game changer for the kingdom.
Khalid al-Abdulqader, Saudi Aramco’s unconventional resources general manager, suggested in March that Saudi Arabia’s gas resources from shale and other alternative supplies are “huge.” He said production of shale gas from the kingdom’s North Arabia basin was to start that month and reach its target by year-end.
Saudi Aramco has been exploring for shale gas in the South Ghawar and Jafurah basins and Abdulqader likened the gas potential of Jafurah to the Eagle Ford shale basin in Texas, the second biggest shale formation in the United States with 22.7 Tcf of gas reserves. Abdulqader said Saudi Aramco intended to develop the entire basin, using improved technology to reduce costs.
Saudi Arabia faces physical and financial challenges in drilling for and producing unconventional gas, including shale gas, which is trapped between impermeable rock formations often deep underground, and requires fracking. While US oil and gas producers have been able to drill for shale oil and gas at reduced costs that are largely attributed to experience and advancements in technology, Saudi Arabia will likely sustain double or more of typical US operating costs.
One of Saudi Aramco’s primary obstacles to exploiting its shale gas potential has been access to fresh water, as fracking traditionally involves pumping a combination of large volumes of fresh water, chemicals and sand to force gas out of the formations.
In its 2013 annual review, Saudi Aramco acknowledged the fresh water conundrum and reported that the company was developing new hydraulic fracturing technologies to enhance recovery rates and increase cost efficiency, including “a CO2-based fracturing fluid as one of the technologies that may meet the water supply challenge.” Saudi Aramco already produces large volumes of desalinated water to inject into maturing oil fields to maintain reservoir pressure.
Saudi Aramco would benefit from technology that enables it to frack successfully with an alternative to fresh water, such as seawater or liquefied petroleum gas, which is where Halliburton will come in handy with its technological expertise. Halliburton already has a lay of the land because Saudi Aramco commissioned the firm and fellow oilfield services company Schlumberger to conduct feasibility studies on shale gas production in Saudi Arabia when Saudi Aramco began its shale gas exploration programme.
In November, Saudi Aramco CEO Amin Nasser said the company would spend $300 billion over ten years on upstream oil and gas projects, with the latter including conventional and unconventional gas activities.
It is unclear how much of that amount is dedicated to shale gas exploration and development. Only time and money will reveal how cost-effective it will be for Saudi Aramco to produce gas in large enough quantities to meet domestic power demand and industry needs while freeing more Saudi crude for export.