More Saudi oil, more unconventional gas coming

By Eric Watkins

LOS ANGELES, May 30 – Even as the International Energy Agency touted the coming Golden Era of Gas, Saudi Aramco released Aiming Higher, a review of 2011 showing the firm’s increased output of crude oil, with more on the way in the coming year.

“Social and political unrest affected parts of the Middle East, while many nations struggled to boost economic growth against a backdrop of high unemployment and large national debt,” said Saudi Arabia’s Minister of Petroleum and Mineral Resources, Ali I. Al-Naimi.

“Such circumstances point to the need for steadfast consistency and readiness for swift and decisive action on the part of energy companies and policymakers alike,” Al-Naimi said in Aiming Higher.

The Saudi minister had no hesitation in stating the role played by Saudi Aramco during the unrest of 2011, saying it supported global energy security and petroleum market stability through “the continuing reliability of its operations and its investment in significant spare production capacity.”


Al-Naimi also alluded to the role played by Saudi Aramco’s spare capacity in the current international impasse with Iran.

“Historically, our spare capacity has been tapped to compensate for production disruptions and declining supply from other major suppliers, and is a cornerstone of the Kingdom’s forward-looking energy policy,” he said.

“As Saudi Aramco continues to meet growing international and domestic demand for energy, the company is taking great steps to expand the role it plays in the energy industry and the petroleum sector,” Al-Naimi said.

That view was echoed by Saudi Aramco President Khaled A. Al-Faleh, who said: “We will continue to lead the world in upstream technologies that significantly improve the rate of recovery from our fields and contribute to the discovery of additional hydrocarbon resources to meet the needs of our fellow human beings.”


The Saudi Aramco report underlined the Kingdom’s importance regarding the world’s oil reserves and production, saying it holds the world’s largest proven conventional crude oil and concentrate reserves at 259.7 billion barrels (bbl).

It also stated that the Kingdom controlled 13.3% of the world’s crude oil output in 2011, producing an average of 9.1 million b/d of crude oil production, a figure annualized at 3.3 billion bbl of crude oil.

The Saudi Aramco report stressed the Kingdom’s increased efforts in gas production, saying it focused heavily on major offshore developments in the Arabian Gulf, as well as its new facilities for gas processing and natural gas liquids fractionation.

According to the report, Saudi Arabia currently holds the world’s fourth-largest natural gas reserves of 282.6 trillion standard cubic feet (scf), and in 2011 produced 9.9 billion scf per day of gas, annualized to 3.6 trillion scf.


Saudi Arabia is also turning to the development of its unconventional gas reserves, which may rival its conventional gas reserves, according to the report.

“The development of new technology in areas of reservoir imaging, production enhancement, fracture detection and drilling optimization has dramatically improved the feasibility and affordability of unconventional gas production,” the report said.

Saudi Aramco’s unconventional gas program aims to augment conventional gas supplies to satisfy the growing demand for energy in the Kingdom well into the future, enabling the firm to “allocate crude oil toward high-value streams.”

The Saudi report coincided with release of the IEA’s special World Energy Outlook report on unconventional gas, called Golden Rules for a Golden Age of Gas – an age that looks increasingly possible if the right procedures are followed.


“The technology and the know-how already exist for unconventional gas to be produced in an environmentally acceptable way,” said IEA Executive Director Maria van der Hoeven.

“But if the social and environmental impacts are not addressed properly, there is a very real possibility that public opposition to drilling for shale gas and other types of unconventional gas will halt the unconventional gas revolution in its tracks,” van der Hoeven said.

“The industry must win public confidence by demonstrating exemplary performance; governments must ensure that appropriate policies and regulatory regimes are in place,” she said.

The report argues that there is a critical link between the way governments and industry respond to these social and environmental challenges and the prospects for unconventional gas production. Depending on those responses, IEA sets out two possible future directions for unconventional gas.


In what it calls a “Golden Rules Case,” the application of these rules helps to underpin a brisk expansion of unconventional gas supply, which has far-reaching consequences:

  • World production of unconventional gas, primarily shale gas, more than triples between 2010-35 to 1.6 trillion cubic meters.
  • The United States becomes a significant player in international gas markets, and China emerges as a major producer.
  • New sources of supply help to keep prices down, stimulate investment and job creation in unconventional resource-rich countries, and generate faster growth in global gas demand, which rises by more than 50% between 2010 and 2035.

In a Low Unconventional Case where no Golden Rules are in place, IEA said a lack of public acceptance means that unconventional gas production rises only slightly above current levels by 2035. Among the results:

  • The competitive position of gas in the global fuel mix deteriorates amidst lower availability and higher prices, and the share of gas in energy use barely increases.
  • Energy-related CO2 emissions are higher by 1.3% compared with the Golden Rules Case but, in both cases, emissions are well above the trajectory required to reach the globally agreed goal of limiting the temperature rise to 2°C.

IEA said that the Golden Rules underline the importance of full transparency, measuring and monitoring of environmental impacts and engagement with local communities; careful choice of drilling sites and measures to prevent any leaks from wells into nearby aquifers.

They also include rigorous assessment and monitoring of water requirements and of wastewater; measures to target zero venting and minimal flaring of gas; and improved project planning and regulatory control.

© Glamma Productions Inc. 2012


About Eric Watkins

Eric Watkins is a consultant specializing in oil diplomacy. A former journalist, Mr. Watkins's work has appeared in numerous leading publications including The Wall Street Journal, The Economist, The Financial Times, and specialist media such as Oil & Gas Journal, Middle East Economic Survey (MEES), and Lloyd's List.
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