Saudis launch major gas drilling in Red Sea

Nov. 21, 2013 at 1:23 PM
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JEDDAH, Saudi Arabia, Nov. 21 (UPI) -- Saudi Arabia is fast-tracking its first major offshore natural gas fields in the Red Sea, a high-priority project that's seen as the start of a massive new energy program, off the kingdom's west coast.

The objective is to produce gas for power-generation to free up for export growing volumes of oil that are being used domestically to cope with a growing domestic demand.

The kingdom's giant state oil company, Aramco, has not disclosed any estimate of the Red Sea's potential yet, "but there could be up to 100 billion barrels of oil equivalent under the sea bed," observed analyst Persian Gulf analyst Kevin Baxter.

That's about equal to a 38 percent increase in the kingdom's state oil reserves of 267 billion barrels, the largest in the world and overwhelmingly located on land in the Eastern province on the shores of the gulf and the Rub al Khali, the vast Empty Quarter in the south.

Aramco will first develop the Ahmar-1 non-associated gas field off the coast of Saudi Arabia's northwestern Tabuk province that borders Jordan.

Seven wells are expected to be drilled in the field, discovered in 2012 about 16 miles off

the port city of Duba, which will be the center of the expected regional gas boom.

It will be the first full offshore gas field the Saudis have developed, underlining the recent shift in their energy policy toward gas and realigning their export program to Asia.

A major gas processing facility and a large power plant are scheduled for construction in Duba, which will become the apex of a pipeline network to carry the gas to industrial cities south along the Red Sea Coast such as Yanbu, Jeddah and Jizan.

Saudi Arabia's crude oil exports in September were reported to be close to an 8-year high, indicating that record-breaking production by the kingdom of more than 10 million barrels per day is feeding into the global market despite growing domestic consumption attributed primarily to power-generation.

With domestic consumption of oil increasing, there were concerns about whether the economy would absorb this.

But the Financial Times reported that statistics published by the Joint Organization Data Initiative earlier this month showed that the kingdom exported 7.84 million barrels per day in September, the highest monthly rate since November 2005.

This was the result of progress in reducing domestic crude consumption. Use of oil by power stations fell from 758,000 bpd in third-quarter 2012 to 722,000 bpd in the equivalent period this year.

Aramco says this is because of growing gas production, much of it the by-product from oil fields.

Meantime, exploration for shale gas in the kingdom, originally scheduled to start in 2020, was launched this year, although it's unlikely that substantial quantities will be produced before the end of the decade.

Domestic consumption of oil has reached nearly 3 million bpd and is growing at a rate of 7 percent a year. At this rate, domestic requirements will double in a decade if sufficient volume of gas cannot be produced.

The Red Sea program will bring new challenges.

Aramco has carried out geophysical surveys in the waterway which links the Mediterranean and the Indian Ocean since 2009, but mostly in the shallow coastal waters off Tabuk.

But the big fields are believed to be in deeper water, unlike those in the much shallower waters of the Persian Gulf on the kingdom's east coast where depths rarely exceed 260-330 feet. In much of the Red Sea, the depths are 10 times that.

"The vast majority of the seismic surveys are still being evaluated, meaning large-scale development is still not a guaranteed prospect as of late 2013," Baxter reported.

"The prospect of multiple offshore fields combined with the development of a major onshore processing hub is attracting international contractors looking to work on the Red Sea coast.

"Deep-water oil production means companies with extensive operations in Europe's North Sea and the Gulf of Mexico, off the U.S. coast, will be well positioned to secure work when tenders are released," he noted.

"The impact of developing oil and gas assets in the Red Sea will be massive if full-scale production goes ahead."

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