Saudi Arabia’s $100bn plan to become largest shale gas producer outside of the US

Special Saudi Arabia’s $100bn plan to become largest shale gas producer outside of the US
The Kingdom is estimated to be sitting on the fifth largest shale gas reserves in the world. (Shutterstock)
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Updated 01 December 2021

Saudi Arabia’s $100bn plan to become largest shale gas producer outside of the US

Saudi Arabia’s $100bn plan to become largest shale gas producer outside of the US
  • Saudi Arabia’s $100bn plan to become largest shale gas producer outside of the US

LONDON: Saudi Aramco’s award of $10 billion worth of contracts on its giant Jafurah project has finally fired the starting gun to develop what is thought to be the world’s biggest shale gas field outside of the US.
Having battled with America’s shale oil producers for market share over the last decade, the Kingdom is now adopting the advanced low-cost techniques of its fracking rivals and is set to spend up to $100 billion on Jafurah to rapidly increase its domestic gas production.
The Kingdom is estimated to be sitting on the fifth largest shale gas reserves in the world.
Saudi Energy Minister Prince Abdulaziz bin Salman earlier said the Jafurah gas field will place the Kingdom third in the world in natural gas production by 2030.
But does Saudi Arabia really have the potential to replicate the soaring success of US shale gas development?


Saudi Aramco Chief Executive Amin Nasser certainly thinks so. Announcing the contracts this week, he said: “It is a breakthrough that few outside the Kingdom thought was possible and which has positive implications for energy security, economic development and climate protection.”
Production is scheduled to begin within the next three years. The field will supply cleaner natural gas for domestic use in the Kingdom, along with feedstock for both petrochemical production, and crucially, low carbon hydrogen power.
Jafurah is expected to contribute to Saudi Arabia’s goal of producing half of its electricity from gas and half from renewables as it pursues its 2060 net-zero target. Indeed, Jafurah alone is forecast to replace up to 500,000 barrels of oil a day that would otherwise be used for domestic consumption.
All this serves the goals of the Kingdom’s Vision 2030 program to diversify the economy from crude oil and sharply reduce its carbon footprint, even if the scheme will enable the Kingdom to increase its crude exports.

The Kingdom, however, has no plans to export the gas from Jafurah as Prince Abdulaziz told reporter on Nov. 29 in Dhahran following the announcement of the new contracts to develop the basin.

We will keep our gas to ourselves

Saudi Energy Minister Prince Abdulaziz bin Salman


But it was thought that fracking in Saudi Arabia will be more expensive than it is in the US, not least because the Kingdom is not renowned with an abundance of natural water, a critical component in the fracking process.
The fracking process requires pumping water, sand and chemicals into the fields at high pressure which fractures the shale rock and allows the hydrocarbons to escape.
“We managed to reduce drilling cost by 70 percent and stimulation cost by 90 percent since the 2014 cost benchmark, while increasing well productivity six-fold compared with the start of the program,” Nasser said on Monday.
Aramco plans to use seawater for fracking at Jafurah. Earlier this year, the company also invited bids for a water desalination plant at the field. Desalinated water is used in gas processing plants. An earlier bidding process was abruptly canceled last year and the current tender process has reduced the capacity of the desalination plant by around 20 percent.




Sadad Al Husseini, former EVP of Aramco


However, former Aramco Executive VP Sadad Husseini insists the “water issue” is a red herring.
He told Arab News: “The water issue was resolved years ago. We have aquifers that hold saline water and the Saudi oil industry has a long history of using this water for drilling.”
Husseini also dismissed cost comparisons with the US shale industry.
He said: “The cost of fracking depends on the depth of the reservoir. In the US, they work with shallower reservoirs, around 3,000 to 4,000 feet deep, which makes fracking less costly. In Saudi Arabia, the reservoirs will be 9,000 to 10,000 feet deep. It’s technically more challenging, but unlike the US, those deep wells are not just producing gas, they’re also producing a lot of condensates, most notably ethane, along with gas, and that is profitable and makes the economics of this field work. Ethane feeds the petrochemical industry.”
He added: “It’s a challenging development but it wouldn’t have advanced if the issues hadn’t been resolved.
Developing shale gas reserves outside the US has not been particularly successful, partly due to environmental concerns - particularly in large population centers in Europe, a lack of infrastructure, and difficulties accessing and disposing of water used in the process.
However, Jafurah is close to the Gulf coast with relatively easy access to seawater, and is also adjacent to the world’s largest oilfield, Ghawar, and its substantial energy infrastructure.
Production at Jafurah is expected to commence in 2024 and is forecast to reach up to 2 billion cubic feet per day of sales gas, 418 million cubic feet per day of ethane and about 630,000 barrels per day of gas liquids and condensates by 2030. Investment over that period will amount to $68 billion, but is expected to total more than $100 billion overall.
Domestic employment, another key plank of the Kingdom’s Vision 2030, is also central to the scheme. It is understood that along with fields under development in North Arabia and South Ghawar, the Jufarah project will create more than 200,000 direct and indirect jobs in the Kingdom.
The scheme will also incorporate new technology, most notably using industrial internet of things and video analytics.
The Jafurah project will not only aid the Kingdom’s environmental ambitions but will also support its petrochemicals industry. “Its ethane and liquified natural gas are highly valuable feedstocks for the Kingdom’s petrochemical’s industry,” the Aramco chief said.

 


Egypt In-Focus — Annual headline inflation rises 1%; M&A activity amounts to $3.2bn in H1


Egypt In-Focus — Annual headline inflation rises 1%; M&A activity amounts to $3.2bn in H1

Updated 11 August 2022

Egypt In-Focus — Annual headline inflation rises 1%; M&A activity amounts to $3.2bn in H1


Egypt In-Focus — Annual headline inflation rises 1%; M&A activity amounts to $3.2bn in H1


CAIRO: Egypt’s annual headline inflation rose to 15.6 percent in July, up from 14.6 in June, according to the Central Agency for Public Mobilization and Statistics.

CAPMAS attributed the rise in inflation to the increase in food and beverage prices that grew by 23.8 percent, along with growth in commodity and services prices.

M&A activity

Egypt reported a total of 65 mergers and acquisitions deals, valued at $3.2 billion, during the first six months of 2022, according to the EY MENA M&A Insights report.

Deal activity has surged thrice year-on-year during the first half of 2022. The report attributed the surge to “favorable government initiatives including granting a special license to foreign investors.” 

Port agreements

Egypt on Thursday signed two initial agreements for the development of port facilities with Hutchison Ports, Cosco and CMA CGM, Reuters reported citing a Cabinet statement.

The agreements with the international consortium could see investments of up to 800 million, it added.

Gas consumption 

Egypt has launched a plan to rationalize gas consumption in electricity plants in a bid to save foreign currency and achieve financial returns from gas export, according to Daily News Egypt. 

Maersk to invest $500m in Egypt

Danish shipping company Maersk is planning to invest  $500 million in Egypt to operate a new 1,000-meter container berth adjacent to the existing 500-meter berth in East Port Said. 

The company also aims to increase the number of cranes to 30 winches, all powered by electricity instead of diesel, according to a statement. 

This came at the end of  the head of the Suez Canal Authority Osama Rabie’s tour to the Netherlands and Denmark, which lasted 4 days, from Aug.7 to 10.

 


Oil rises as IEA hikes 2022 demand growth forecast

Oil rises as IEA hikes 2022 demand growth forecast
Updated 11 August 2022

Oil rises as IEA hikes 2022 demand growth forecast

Oil rises as IEA hikes 2022 demand growth forecast

LONDON: Oil prices rose by over 2 percent on Thursday after the International Energy Agency raised its oil demand growth forecast for this year as soaring natural gas prices lead some consumers to switch to oil.

Brent crude futures gained $2.39, or 2.5 percent, to $99.79 a barrel by 1348 GMT, while US West Texas Intermediate crude futures rose $2.65, or 2.9 percent, to $94.58.

“Natural gas and electricity prices have soared to new records, incentivizing gas-to-oil switching in some countries,” the Paris-based agency said in its monthly oil report, in which it raised its outlook for 2022 demand by 380,000 barrels per day.

By contrast, the Organization of the Petroleum Exporting Countries on Thursday cut its 2022 forecast for growth in world oil demand, citing the economic impact of Russia’s invasion of Ukraine, high inflation and efforts to contain the pandemic.

OPEC expects 2022 oil demand to rise by 3.1 million bpd, down 260,000 bpd from the previous forecast. However, it still sees a higher overall global oil demand figure than the IEA for 2022.

A rise in US oil inventories last week and the resumption of crude flows on a pipeline supplying central Europe capped further price gains.

US crude oil stocks rose by 5.5 million barrels in the most recent week, the US Energy Information Administration said, more than the expected increase of 73,000 barrels.

Gasoline product supplied rose in the most recent week to 9.1 million barrels per day, though that figure shows demand down 6 percent over the last four weeks compared with the year-ago period.

The premium for front-month WTI futures over barrels loading in six months’ time was pegged at $4.38 a barrel on Thursday, the lowest in four months, indicating easing tightness in prompt supplies.

The resumption of flows on the southern leg of the Russia-to-Europe Druzhba pipeline further calmed market worries over global supply.


Egypt to ration electricity to boost gas exports

Egypt to ration electricity to boost gas exports
Updated 11 August 2022

Egypt to ration electricity to boost gas exports

Egypt to ration electricity to boost gas exports

CAIRO: Egypt’s Cabinet has approved a plan to ration electricity to save natural gas that it will instead divert to the export market to generate foreign currency, it said on Thursday.

Egypt has suffered from an acute foreign currency shortage since Russia's February invasion of Ukraine, which pushed up global commodity prices, led to the collapse of tourism from the two countries and drove up the cost of borrowing.

Under the draft plan, shops and malls will have to limit their use of strong lights and keep their air conditioning at no cooler than 25 degrees Celsius.

Ministries and government facilities will have to turn off lighting at the end of working hours, the statement added. Street lighting will also be reduced.

The government last month postponed a planned increase in electricity prices by six months. The higher prices would have been intensely unpopular among a population that over the last few years has endured a series of harsh austerity measures.

On Tuesday, Prime Minister Mostafa Madbouly said the government hoped to reduce the amount of gas used to generate electricity by 15 percent. He said domestic power plants bought their natural gas at one-tenth the price that it could fetch on international markets.

Europe has been seeking alternative sources of gas to cut its reliance on Russian gas as the war in Ukraine escalates.

Rapid growth in Egypt’s natural gas supplies, boosted by the discovery of the Mediterranean’s largest field, turned it from a net importer to an exporter in late 2018.

Egypt exported 9.45 million cubic meters of liquid natural gas in the first seven months of 2022, up 44 percent from a year earlier, according to Refinitiv data. 


Ethiopia starts power generation from second turbine at mega-dam

Ethiopia starts power generation from second turbine at mega-dam
Updated 11 August 2022

Ethiopia starts power generation from second turbine at mega-dam

Ethiopia starts power generation from second turbine at mega-dam

RIYADH: Ethiopian Prime Minister Abiy Ahmed kickstarted electricity production from the second turbine at its controversial mega-dam on the Blue Nile on Thursday, despite continuing objections by Egypt and Sudan over the project, according to AFP.

Abiy also confirmed that a third filling of the multi-billion dollar Grand Ethiopian Renaissance Dam was under way, a development that led Egypt last month to protest to the UN Security Council.

Thursday’s move came even though there is still no agreement between Ethiopia and its downstream neighbors Egypt and Sudan about the GERD’s operations.

Abiy insisted that the third filling of the $4.2 billion dam — set to be the largest hydroelectric scheme in Africa — was not causing any water shortages for the two countries.

“We have repeatedly told downstream countries, especially Egypt and Sudan, that by generating power we’re developing our economy, as well as (our desire) to see our citizens who live in the dark see light,” he said.

There was “no aim to sideline and harm” those countries, he added.

Ethiopia first began generating electricity at the dam in February. Currently, the two turbines, out of a total of 13 at the dam, are generating 750 megawatts of electricity.

We are ready to face all scenarios after Ethiopia completes the third filling phase of the Renaissance Dam, and we expect an unprecedented rise in the Nile waters after the gates of the dam are opened, the Sudanese Minister of Irrigation Yasser Abbas told Asharq.  

 


Macro Snapshot — Romania inflation exceeds expectations; Singapore downgrades GDP in Q2

Macro Snapshot — Romania inflation exceeds expectations; Singapore downgrades GDP in Q2
Updated 11 August 2022

Macro Snapshot — Romania inflation exceeds expectations; Singapore downgrades GDP in Q2

Macro Snapshot — Romania inflation exceeds expectations; Singapore downgrades GDP in Q2

CAIRO: Romania's headline inflation exceeded expectations in July yet smaller rate hikes are still expected, while China’s July vehicle sales surged by 30 percent from a year earlier. Singapore downgraded its gross domestic product in the second quarter of this year as risks grew further, whereas the Federal Reserve officials stated the need for additional rate hikes despite the slowing inflation rates. 

Romania inflation overshoots expectations in July

Romania’s headline inflation rate rose above expectations in July but is showing signs of flattening out and analysts expect the central bank to continue to slow the pace of monetary tightening.

The year-on-year inflation rate in Romania hit 14.96 percent in July, just off a 19-year high and above a forecast of 14.4 percent in a Reuters poll.

It came down from 15.05 percent in June but analysts say there is still a chance it could creep slightly higher in the next two months.

Singapore downgrades gross domestic product in Q2

Singapore’s economy expanded less than initially estimated in the second quarter and the government revised its growth projections for 2022 lower, flagging risks to the global outlook from the Ukraine war and inflation.

The gross domestic product grew 4.4 percent year-on-year in the second quarter, the Ministry of Trade and Industry said, slower than the 4.8 percent growth seen in the government’s advance estimate.

“Downside risks in the global economy remain significant...further escalations in the Russia-Ukraine conflict could worsen global supply disruptions and exacerbate inflationary pressures through higher food and energy prices,” said Gabriel Lim, permanent secretary of MTI at a media briefing.

Fed officials say more rate hikes needed, despite slowing inflation

Slowing US inflation may have opened the door for the Federal Reserve to temper the pace of coming interest rate hikes, but policymakers left no doubt they will continue to tighten monetary policy until price pressures are fully broken.

A US Labor Department report Wednesday showing consumer prices didn’t rise at all in July compared with June was just one step in what policymakers said would be a long process, with a red-hot job market and suddenly buoyant equity prices suggesting the economy needs more of the cooling that would come from higher borrowing costs.

The Fed is “far, far away from declaring victory” on inflation, Minneapolis Federal Reserve Bank President Neel Kashkari said at the Aspen Ideas Conference, despite the “welcome” news in the CPI report.