Aramco Awards $25 Billion in Contracts as Jafurah Shale and Master Gas System Expansion Enters Next Phase
Aramco’s investment pivot to gas aims to propel Saudi Arabia into the top tier of gas producers and LNG players globally by 2030.
Aramco’s Shaybah natural gas liquids (NGL) plant which processes NGL from Shaybah field at the northern edge of the Ar Rub’ al Khali (known as the “Empty Quarter”) desert in Saudi Arabia.
Source: Aramco
Aramco has awarded $25 billion in new contracts aimed at upstream unconventional gas production and a buildout of midstream facilities—processing plants, pipeline networks, and related installations to boost Saudi Arabia’s gas production by 60% over 2021 levels by the turn of the decade.
Fig. 1—The Jafurah basin east of Saudi Arabia’s Ghawar field, the largest conventional oil field in the world.
Source: WPC-22-1223
Awards related to Phase 2 of the Jafurah shale gas project include 16 contracts worth $12.4 billion covering construction of gas compression facilities and pipelines, plus expansion of the Jafurah Gas Plant including construction of gas processing trains, utilities, sulfur, and export facilities.
Among the scope of works is construction of the new Riyas natural gas liquids (NGL) fractionation facilities in Jubail—including NGL fractionation trains, and utilities, storage, and export facilities—to process NGL received from Jafurah, Aramco said in a press release.
An additional 23 gas rig contracts worth $2.4 billion were also announced on 30 June, plus two directional drilling contracts valued at $612 million. Earlier, 13 well tie-in contracts at Jafurah worth a total of $1.63 billion were awarded over the period from December 2022 to May 2024, according to Aramco.
Jafurah is the largest shale gas field in the Middle East with confirmed reserves of 229 Tcf, a volume that business website NikkeiAsia estimates is “equivalent to about 70 years of Japan's LNG gas imports.”
Aramco expects to invest more than $100 billion over the life cycle of Jafurah which is destined to become the largest shale gas project outside of the US with first gas expected by 2025 and a sustainable sales gas rate of 2 Bcf/D by 2030.
Saudi Arabia Seeks Dominance in Supplying Gas
As regards Phase 3 of the Master Gas System (MGS) expansion to deliver natural gas to customers across the Kingdom, Aramco announced 15 lump-sum turnkey contracts worth about $8.8 billion to finance construction of 821 km of pipeline and the upgrading of existing gas compression systems.
In April, Worley tapped Baker Hughes on Aramco’s behalf to supply 17 pipeline centrifugal compressors driven by aeroderivative gas turbines for Phase 3 after having already delivered 18 of the same compressors for Phase 1 and 2 of the MGS.
Aramco awarded Samsung E&A the engineering, procurement, and construction (EPC) contract also in April to expand the processing capacity of the Fadhili Gas Plant—a $6-billion award out of $7.7 billion in total contracts to expand Fadhili’s processing capacity by 1.5 Bcf/D.
The goal is to increase the size of Saudi Arabia’s gas distribution network by raising the Kingdom’s total capacity by an additional 3.15 Bcf/D by 2028 by installing 4000 km of pipelines and 17 new gas compression trains.
“The scale of our ongoing investment at Jafurah and the expansion of our Master Gas System underscores our intention to further integrate and grow our gas business to meet anticipated rising demand,” Amin H. Nasser, Aramco president and CEO, said in a news release.
This strategy, he said, “complements the diversification of our portfolio, creates new employment opportunities, and supports the Kingdom’s transition towards a lower-emission power grid, in which gas and renewables gradually displace liquids-based power generation.”
Fig. 2—Aramco’s Fadhili Gas Processing Plant, a part of the Kingdom’s Master Gas System which is undergoing expansion.
Source: Aramco
Aramco’s MGS is an extensive network of pipelines connecting Saudi Arabia’s key gas production and processing sites that since 1982 have delivered associated gas to the domestic market. Its expansion aims to replace oil with gas for domestic power generation.
In January, the Saudi oil ministry ordered Aramco to halt its oil expansion plan and to target a maximum sustained production capacity of 12 million B/D, which is 1 million B/D below the 2027 target it had announced in 2020.
Prince Abdulaziz bin Salman Al Saud explained the ministry’s rational in February at the International Petroleum Technology Conference in Dhahran as quoted by independent Middle East news agency Al-Monitor: "I think we postponed this investment simply because … we're transitioning, and transitioning means that our oil company became a hydrocarbons company and now an energy company.”
NikkeiAsia noted that by halting plans to expand its crude oil production capacity Aramco has freed up $40 billion in investment between 2024 and 2028 to allocate to natural gas and other projects.
Saudi Arabia Assessing Possible LNG and Blue Hydrogen Initiatives
In June 2023, the Washington, DC-based Middle East Institute reported that Aramco was discussing a possible LNG export project with TotalEnergies and Sinopec that would source its gas from the Jafurah gas field.
Aramco entered the global LNG business in 2019 when it bought a 25% stake in Phase 1 of the Port Arthur LNG export terminal in Texas and signed a 20-year sales and purchase agreement (SPA) with Sempra to offtake 5 mtpa of production.
This past June, the Saudi major agreed two more 20-year SPAs with LNG exporters in Texas—one with Sempra for 5.0 mtpa from the Port Arthur Phase 2 expansion and another with NextDecade for 1.2 mtpa from Rio Grande LNG’s Train 4 in Brownsville.
The SPAs were agreed under nonbinding Heads of Agreement (HoA) contracts between the parties. Under the HoA signed with Sempra, Aramco is also negotiating a possible 25% Saudi stake in Port Arthur’s Phase 2 expansion.
Building on its US involvement, Aramco is also reaching out to Australia after having acquired in September 2023 a $500-million minority stake in MidOcean Energy which 6 months later (in March 2024) completed its purchase of Tokyo Gas’ interests in a portfolio of Australian integrated LNG projects.
In addition, Aramco is also considering a greenfield blue hydrogen strategy as evidenced by a16 July announcement that it had acquired a 50% share in the Jubail-based Blue Hydrogen Industrial Gases Company, a wholly-owned subsidiary of Air Products Qudra.
The Ins and Outs of Producing Shale Gas in Saudi Arabia
But back to shale gas and Aramco’s upstream quest to turn the Jafurah basin into a mother lode of gas production on a level that the adjacent Ghawar oil field—the world’s largest oil field—has been for liquids.
Work at Jafurah is currently considered precommercial, though, as Aramco tests its first high-intensity fracture designs along with the limited-entry technique that has led to improved well performance in North American shale wells.
Saudi Arabia’s application of these technologies is discussed in SPE 215668 which Aramco engineers presented at the 2023 SPE International Hydraulic Fracturing Technology Conference and Exhibition in Muscat.
BP’s Energy Outlook 2024 notes that demand for LNG is expected to drive growth in gas production in the US and the Middle East while gas production declines elsewhere in the world.
In the 2024 Outlook’s “current trajectory” scenario, 80% of global growth in natural gas production will occur in these two regions “with three-quarters of this production growth used for LNG exports.”
Even under the Outlook’s net-zero scenario, which assumes net-zero targets are met by 2050, US and Middle East gas production continues to rise because “growth in LNG exports (will offset) declines in domestic consumption” in both regions.
Meanwhile, though Russia has the largest gas reserves globally and ranks second as a gas producer, its production is expected to stagnate because of the impact of the war in Ukraine and the effect that international sanctions are having on the expansion of Russia’s LNG exports, BP argues in its 2024 Outlook.
FOR FURTHER READING
SPE 215668 Application of High-Intensity Fracturing Technique in Jafurah Unconventional Field in Saudi Arabia, by Jose Valbuena, Jose Rueda, Muhammad Qasim, Ghaliah Khoa, Maram Zakary, and Sofiane Fekkai, Saudi Aramco.
WPC-22-1223 Saudi Arabia’s Unconventional Program in the Jafurah Basin: Transforming an Idea to Reality With the Jurassic Tuwaiq Mountain Formation by Ahmed Almubarak, Ahmed Hakami, Ivan Leyva, and Clay Kurison, Saudi Aramco.
