2023-05-06 17:53:11
After many decades leading the world in oil production and export, Saudi Arabia is now planning to expand natural gas production. This expansion came as a result of two important factors; The first is the increase in domestic demand for energy, which put great pressure in the past years on oil and liquids such as diesel and heavy fuel oil, and we all remember the terrifying numbers of oil burning in the summer a decade ago, specifically in 2011 when it reached alarming levels.
The other factor is Saudi Arabia’s tendency to be a clean energy producer, especially with its international commitments to reduce its carbon emissions, as gas is still the best option compared to oil liquids. In this regard, the Kingdom seeks to use gas to produce half of the country’s electricity, while the other half comes from renewable energy, by 2030.
In order to expand gas production, Aramco has embarked on developing many fields, including Al-Hasaba, Al-Arabiya and Karan, and has established non-associated gas production plants in Al-Fadhili and Abu Hadriya, and finally it will add Saudi Aramco’s giant “Al-Jafurah” gas field, which is an unconventional field similar in nature to shale gas fields in the United States, contains 200 trillion cubic feet of gas.
In front of these huge expansions in gas, an important question arises: Has the time come to export natural gas from Saudi Arabia to the rest of the world, especially since the gas market is full of opportunities in light of the cutoff of Russian gas from Europe following the political differences over the Ukraine war? Or should Saudi Arabia keep its gas for domestic use?
This question was not raised before, but it has become an issue now, especially following statements made by the head of Aramco, Amin Nasser, during a visit to China last month, during which he made it clear that the company is considering entering the field of liquefied natural gas.
From a political point of view, it is good for Saudi Arabia to enter the field of selling natural gas abroad, because long-term gas contracts and its investments in export and reception are huge and make countries in a state of Catholic marriage, in contrast to oil, which can be sold to any other customer easily whenever the two parties disagree.
This approach may serve Saudi Arabia politically, but it may be economically feasible for Saudi Arabia not to export it abroad and use it strategically for other goals. The use of natural gas for burning internally contributes to the provision of more oil for export, and thus increase income further. At the same time it reduces emissions. Finally, it is converted into other products such as blue hydrogen, which is more environmentally friendly than other fuels. Hydrogen is more expensive than natural gas if we calculate its production costs.
It may be more feasible for Aramco to search for liquefied natural gas projects outside Saudi Arabia, thus providing domestic gas to Saudi Arabia and entering the gas market from abroad.
Wael Mahdi
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