BAKU, Azerbaijan, March 3
By Azer Ahmadbayli - Trend:
Gas is gradually becoming the same strategic commodity as oil with its share in the global energy mix continuously growing.
Saudi Arabia, which has been the market leader in oil production and export for decades, decided to adjust its energy policy some time ago, and although oil will remain the dominant income item in the Saudi economy, the Kingdom has made a claim to become one of the leaders in the global gas market as well.
The Kingdom’s turning to gas is of conscious and multipurpose character.
Recently, Saudi national oil company Saudi Aramco has announced regulatory approval for the development of the Jafurah unconventional gas field in the Eastern Province of the Kingdom, the largest non-associated gas field in Saudi Arabia to date. Presumably, the field contains about 5.7 trillion cubic meters of gas. With the investment of $110 billion, production is scheduled to begin in early 2024.
Jafurah could generate some $8.6 billion a year in income and contribute $20 billion a year to the Kingdom’s GDP, local media reports say.
According to Amin Nasser, president and CEO of Saudi Aramco, preparation for the field's development has been going on since 2013. During this time, with the help of well-established US companies, fracking technology was mastered and tested in the Arabian Desert using sea water, which previously seemed unrealistic.
If Aramco hits its targets for development of the field, Saudi Arabia would become the world’s third largest gas producer by 2030, Reuters believes.
The Kingdom places great hope in the development of the Jafura field and intends to solve a number of strategic tasks. One of them is to turn Saudi Aramco, which until recently did not show much activity outside the Kingdom, into one of the world's leading oil and gas companies.
The Chairman of Saudi Aramco’s Board of Directors, Yasir Al-Rumayyan openly confirmed this, saying that “the development of Jafurah is expected to enhance the company’s position in the global energy sector, and help achieve its goal of being the world’s pre-eminent integrated energy and chemicals company.”
Indeed, in light of the upcoming second stage of Saudi Aramco IPO, the use of cost-effective shale gas production technologies that have so far been successfully applied only by the US will further increase the company's attractiveness to international financial players.
Deviation from the traditional model of oil dominance towards the development of gas resources also meets the new Saudi “Vision 2030” development concept.
The growth of gas production should solve two more strategic tasks: to ensure growing domestic consumption, and to turn the Kingdom into a gas exporter.
Saudi Arabia is one of the world's largest gas consumers. Domestic consumption has been growing every year for at least the past ten years. The ratio between production and consumption in the country is equal to zero. According to BP statistics, in 2018, both indicators were 112.1 bcm. In other words, all the gas produced in the country goes for domestic consumption.
Increase in gas production twice as much as it is now – from the current 112 bcm/year to 220-230 bcm will allow to solve both tasks. Along with that, it will help the country to free up significant volumes of crude, burned for electricity generation, for export.
The fall in oil prices in 2014, presence of powerful and unfriendly gas rivals nearby, as well as the attack on the Saudi oil infrastructure in September last year, which showed a strong vulnerability in the Saudi oil supply system, were additional but considerable factors in favor of diversifying the Kingdom's energy portfolio.