Aramco, while evaluating how to utilize the gas from the vast "Jafurah" field, is examining strategies for export and financing. This state-owned company is facing significant challenges in gas production and supply.
Gas Export Challenges
When Saudi Aramco began developing the vast "Jafurah" field in 2020, the vision emerged that Saudi Arabia would become a natural gas exporter for the first time. Despite oil exports, the country had not exported any gas abroad, and domestic demand had exceeded supply. The $100 billion Jafurah project was expected to transform Saudi Arabia's gas industry in both aspects. However, after six years, Aramco is still grappling with the challenge of what to do with the massive volume of gas it will produce.
Increasing Gas Production and Meeting Domestic Needs
Gas production at the Jafurah field began last year, and the second phase of the project is expected to kick off by 2030. Aramco has announced that its gas production will increase by about 80% from 2021 until the end of this decade. A significant portion of this gas has a ready market domestically. Saudi Arabia is transitioning its power plants from fossil fuels to gas; a move that allows the country to export more of its produced oil and save the revenues generated from it.
Wood Mackenzie has estimated that the annual production of 180 billion cubic meters of gas in Saudi Arabia could leave up to 50 billion cubic meters of surplus gas per year after meeting domestic needs. Nivan Boroujerdi, a corporate research manager at Wood Mackenzie, stated that Aramco will likely seek foreign customers for its product.
One option for Saudi Arabia is to become a liquefied natural gas (LNG) exporter and potentially compete with countries like the United Arab Emirates and Oman. However, this requires Aramco to construct gas liquefaction facilities. According to one Aramco employee, plans for building an LNG export terminal that was supposed to utilize gas from the second phase of the "Jafurah" field were proposed last year but have currently been put on hold.
Aramco's decision to export gas will have a significant impact on this industry. The company is also striving to derive more value from its other assets, including real estate, power and water facilities, and oil storage tanks.
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