Saudi Aramco, the state oil firm and the world’s largest crude oil exporter and one that will significantly boost the kingdom’s energy resources and that will secure its economic prosperity for decades to come even as the entire Middle East is wrenched by political and religious upheaval.
Finding new supplies of gas, not oil, has become the kingdom’s energy priority. The current domestic consumption of 3m barrels of oil a day to fuel power stations is growing too fast for domestic gas supply in a country where fuel and electricity are heavily subsidised.
Recent estimates indicate that the demand for gas, much of it the by-product from oil fields, is growing at a rate of 7% a year. At that rate, domestic requirements will double in a decade if there is no major increase in gas production, meaning more oil will have to be diverted from exports, the kingdom’s economic lifeline. Massive impact Aramco has made several gas strikes since 2012, but despite the energy riches they could portend they have been accorded low-key coverage and Aramco has not provided any assessment of the Red Sea’s potential yet. However, Gulf analyst Kevin Baxter estimates that on the basis of the voluminous seismic data available, amassed over three years, and the various strikes “there could be up to 100bn barrels of oil equivalent under the sea bed.”
That would constitute a massive 38% boost for the kingdom’s stated oil reserves of 267bn barrels, the largest in the world and largely concentrated on land in the Eastern Province on the western shore of the Gulf and in the Rub Al Khali, the vast Empty Quarter in the south of the kingdom.
“The impact of developing oil and gas assets in the Red Sea will be massive if full-scale production goes ahead,” Baxter observed.
Egypt, which lies along the northwestern sector of the Red Sea, has been drilling offshore for years and has made significant discoveries in water that hold proven reserves of around 8bn barrels of oil. Sudan began its offshore exploration programme in early 2010 with an international consortium headed by China’s National Petroleum Corporation. First strike According to 2011 statistics, Saudi Arabia also has the fourth largest natural gas reserves in the world, after Russia, Iran and Qatar, of 291 trillion cubic feet (tcf ), mostly associated with petroleum deposits, as of January. But production has been limited. That is now changing as the kingdom needs the gas for its own domestic needs, and as markets open up in Asia.
Aramco has said Saudi gas production reached a record high of 11.2 billion cubic feet (bcf ) a day in 2013, up from 10.72 bcf in 2012, and this will increase significantly once the company taps into the Red Sea reservoirs.
The Shoaibi Group, a Saudi company awarded two Red Sea drilling contracts with international partners in March 2011, says that the Red Sea flow is expected to increase the kingdom’s gas production by 40% to 4.5 bcf per day in 2015.
Aramco made its first substantive gas strike in 2012 with the Ahmar-1 field about 16 miles west of the port city of Duba in northern Tabuk province, which borders Jordan. In June this year, Aramco disclosed in its annual report for 2013 that it had discovered three oil and two gas fields in the Red Sea.
It said that a deep-water oil field in the Al Haryd sector and a gas field in the nearby Shaur structure, discovered in 2012, were found in 2013. It gave no indication of the estimated size of the fields, but the report described Shaur as “a potential game-changer in the future of the kingdom’s energy mix”.
The Ahmar find will be the first full offshore field Aramco has developed. US oil analyst Jeff Reed observes that this “underscores the recent shift in Saudi energy policy toward gas and the realignment of their export programme to Asia.”
With exploiting gas its key priority, Aramco wants to fast-track the Red Sea fields and hopes they can be brought online within three years. That would mean the find off Duba could be producing as early as 2016.
That may be overly ambitious. But the Saudis are in a hurry and are moving into the deep water zones where the major fields lie thousands of feet below the sea bed, a new experience for Aramco which has fo-
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SAUDI ARABIA’S OFFSHORE DRILLING PROGRAMME IN THE RED SEA IS TAKING PLACE AMID A REGION-WIDE DRIVE TO DEVELOP THE LARGE GAS FIELDS BELIEVED TO LIE UNDER THE SEA BED, MOSTLY IN DEEP WATER
32 The Middle East December 2014