Saudi Arabia produces a lot of the world’s energy; it consumes a terrific amount, too. Its economy is an eighth the size of Japan’s, its population a quarter. Yet it uses nearly as much natural gas. The kingdom’s Vision 2030 economic plan envisions a diversified economy utilising more than double its current 109bn cubic metres. It cannot meet this target without imports.
The notion of a major energy exporter forced to import gas for domestic needs may well dent the pride of state producer Saudi Aramco. On paper, the Saudi peninsula is awash with gas. Its proved reserves of 8.4tn cubic meters cover 77 years of existing demand. Most, about 70 per cent, sits on top of its oil. This means releasing the gas usually requires producing the crude; something Opec’s swing member does not always wish to do. Furthermore, the country’s output cannot match its needs for much longer. While demand has jumped by half over the past decade, proven gas reserves have inched up by less than a fifth.
Worse, while half its electricity production uses gas, according to the US Energy Information Administration, the other half burns crude oil, curtailing its export potential.All this explains why Saudi energy minister (and chairman of Saudi Aramco) Khalid al-Falih visited Russia’s Yamal liquefied natural gas project last month. He discussed financing the next phase of Yamal, already on stream, run by Novatek and France’s Total. It looks like the new regime in Saudi Arabia, under Crown Prince Mohammed bin Salman, recognises that it needs to import gas.If so, swapping stakes with international oil companies in LNG projects for gas exploration rights within Saudi Arabia seems possible.
Companies were invited to explore the peninsula’s Empty Quarter 15 years ago. The name turned out to be apt. More prospective acreages will be required this time. Saudi Arabia needs to put more energy into sourcing natural gas, and soon.
Source: Financial Times