Pricing Tempers Saudi Unconventional Gas Prospects

Saudi Aramco is keen to develop its unconventional gas resources to meet rising domestic demand but production prices are still too high, according to Amin Nasser, senior vice president for upstream at the company.

"We are heavily looking at unconventional gas at Saudi Aramco in good number of areas within the Kingdom," said Nasser, speaking at a recent event.

Earlier this year Aramco said it started evaluating tight gas and shale gas where it would initially focus on the northwest and in the area of the world's largest onshore oil field Ghawar as gas infrastructure is already in place.

But an industrial gas sales price of  $0.75 per million British thermal units (mmbtu)— a remnant from the days when Saudi had plenty of practically free associated gas coming from its vast oilfields to meet modest internal demand, makes Saudi unconventional gas prospects unattractive for now.

"I think we have huge potential when it comes to unconventional gas... price is an issue, however we think we can bring it with (in) reasonable price compared to crude (oil)," Nasser said.

The firm had been working on tight gas projects for 20 years but had been unable to find technology to make its extraction cost effective.

Increasing gas demand will continue to drive the Saudi giant to continue to develop technologies to unlock unconventional gas resources despite the technical and economic challenges.

The world's biggest crude oil exporter burns many millions of barrels of oil each year in power plants, because it does not have enough gas available to meet demand from power generation and petrochemicals industry growing at seven percent annually.

"Mark my words, in the near future you will see a lot of (unconventional gas) development in this region, there's plenty of gas especially in the unconventional side. Hopefully with the right technology development we can make it affordable, " said Nasser.