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Saudi Aramco Bets on Unconventional Field in $25-Billion Gas Expansion

The world’s biggest oil company and crude oil exporter, Saudi Aramco, is betting big on its unconventional natural gas reserves to strategically grow its domestic and international gas and LNG business.   
Aramco has been seeking a greater role in the global LNG market as it plans to ramp up its natural gas production and trading business. The oil giant is looking to boost its domestic natural gas supply, to replace direct crude burn for its power generation and free up more crude for exports.  
As part of its strategic gas business expansion, Aramco has awarded $25 billion worth of contracts for the development of the unconventional Jafurah field, the biggest unconventional Saudi non-oil associated gas field, and phase three of its Master Gas System project to expand its domestic gas pipeline network, the Saudi state-held oil giant said this weekend.
Jafurah, which could be the largest shale gas development outside the United States, is estimated to contain 229 trillion standard cubic feet of raw gas and 75 billion Stock Tank Barrels of condensate. Phase one of the Jafurah development program began in November 2021 and is progressing on schedule, with initial start-up anticipated in the third quarter of 2025.
Aramco said it expects total overall lifecycle investment at Jafurah to exceed $100 billion and production to reach a sustainable sales gas rate of 2 billion standard cubic feet per day by 2030, in addition to significant volumes of ethane, NGL, and condensate.
This Sunday, the company announced the award of 16 contracts, worth a combined total of around $12.4 billion, for phase two development at Jafurah.
These contracts will involve the construction of gas compression facilities and associated pipelines, expansion of the Jafurah Gas Plant—including the construction of gas processing trains—and utilities, sulfur, and export facilities.
In addition, Aramco awarded 15 lump sum turnkey contracts, worth a combined $8.8 billion, to phase three expansion of the Master Gas System to boost its total capacity by an additional 3.15 billion standard cubic feet per day (bscfd) by 2028 through the installation of around 4,000 km (2,485 miles) of pipelines and 17 new gas compression trains.
The Kingdom’s oil giant also awarded 23 gas rig contracts worth $2.4 billion, along with two directional drilling contracts worth $612 million. Meanwhile, 13 well tie-in contracts at Jafurah, worth a total of $1.63 billion, have been awarded between December 2022 and May 2024.  
“The scale of our ongoing investment at Jafurah and the expansion of our Master Gas System underscores our intention to further integrate and grow our gas business to meet anticipated rising demand,” Aramco’s president and CEO Amin Nasser said.
“This complements the diversification of our portfolio, creates new employment opportunities, and supports the Kingdom’s transition towards a lower-emission power grid, in which gas and renewables gradually displace liquids-based power generation.”
The expansion of the gas production and infrastructure at home follows recent announcements that Aramco has signed major international LNG deals after the Saudi giant entered the global LNG business last autumn by agreeing a deal to buy a minority stake in LNG company MidOcean Energy, which was in the process of acquiring interests in four Australian LNG projects.
Last month, Aramco signed a non-binding agreement to buy LNG from Sempra’s Port Arthur LNG project in Southeast Texas and potentially acquire 25% in the project’s Phase 2. The Saudi firm also entered into a preliminary agreement with NextDecade Corporation for a 20-year LNG offtake deal from train 4 at the Rio Grande LNG export facility in Texas.
Going into LNG trading would be another lucrative business for the Saudi oil giant, considering that LNG demand is only set to grow in the coming years as Europe ditches Russian gas and Asia looks to use more natural gas instead of coal. On the other hand, Aramco’s domestic natural gas expansion will boost the company’s gas offering and replace some of its more valuable crude that it currently burns for electricity generation.
By Tsvetana Paraskova for Oilprice.com
Jul 3, 2024 09:37
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