Saudi Arabia to award major gas deals in 2011

Saudi Aramco says contract follows end of mega project that boosted output at Shaybah

Saudi Arabia intends to award a major contract in 2011 for the construction of one of the region’s largest gas plants at a remote oilfield in the heart of the world’s most barren desert strip, according to its state oil operator.

Saudi Aramco, the largest oil producing company in the world, said the contract follows the completion of a mega project that boosted the crude output capacity at Shaybah oilfield in the Rub Al Khali (Empty Quarter) desert by 50 per cent.

Shaybah, Saudi Arabia’s most remote and exotic oilfield located near the UAE’s eastern border, is now pumping nearly 750,000 barrels per day of Arabian Extra Light Crude compared with 500,000 bpd before the project completion.

“The field currently is producing at its full, expanded capacity,” Saudi Aramco said in its quarterly bulletin, Dimensions, issued this week.

“Development of the related Shaybah NGL (Natural Gas Liquids) Plant is well under way, with construction scheduled to start in summer 2011 and completion projected for fall 2014,” said the Company, which runs the Gulf Kingdom’s hydrocarbon sector, the largest in the world.

It said the plant is designed to process 2.4 billion standard cubic feet per day (scfd) of low-sulfur sweet gas and extract 264,000 bpd of NGL, adding that its NGL would be shipped to Ju‘aymah Gas Plant for further fractionation.

Saudi Aramco said it had awarded the front-end engineering and document (FEED) study for the plant project to American project management consultant KBR (Kellogg Brown & Root LLC.) based in Houston, Texas, whose Shaybah project main office is in the United Kingdom.

“Tenders for the engineering, procurement and construction (EPC) contracts are expected to be awarded in 2011,” the bulletin said.

It said the recently completed crude-capacity-expansion project added a gas-oil separation plant (GOSP) and expanded gas compression and injection facilities as well as the pipelines to transport the additional product.

“The expansion construction project was a tornado of activity and a model for effective teamwork. We started in 2005 and faced multiple challenges, starting with the market conditions and the number of mega projects being run at the same time — Khursaniyah, Khurais, Hawiyah,” said Bader Dulami, the current general supervisor of Saudi Aramco’s Capital Programme Optimization Division who earlier served as project manager for Shaybah.

“The building boom required the company to seek innovative solutions. We were challenged to find qualified contractors to run this project to our objectives.”

Dulami said four new international contractors were introduced to mitigate the problem, adding that the team’s goal was not just to add to the existing facilities but to modernize them.

“We didn’t start from scratch. We took the old design and started to work with Operations and got their lessons learned from the day they started up the old plant to the day we started the new design,” he said.

 “They devised solutions to all the issues faced in the old design, and they scoured the market for the latest technologies to improve processes. Among them were a new flaring system and a new, more efficient way to strip corrosive hydrogen sulfide gas, along with new communication technology.”

Shaybah, believed to be home to more than 20 billion barrels of oil, is spread over 130 salt flats, separated by massive dunes of red sand that tower hundreds of feet above them, which can make communication difficult.

“The terrain at Shaybah is very challenging,” said Abdulrahim Anwah, project engineer for communications. “Signals tend to fade or be obstructed by the sand dunes. That makes Shaybah very unique and difficult at the same time.”

The Shaybah projects are part of a massive hydrocarbon expansion programme launched by Saudi Arabia over the past few years with the aim of raising crude output capacity, boosting gas reserves and setting up related industries.

Releasing its annual report last month, Saudi Aramco said extensive exploration and new technologies would boost the Kingdom’s gas production by more than 50 per cent in 2020. It said such programmes had already resulted in a sharp rise in the country’s natural gas reserves to nearly 275 trillion cubic feet (tcf) at the end of 2009 from around 181 tcf in 1990.

The new discoveries and higher recovery rates also pushed up the country’s non-associated gas deposits to more than 50 per cent of the total gas resources at the end of last year from about 25 per cent in 1990, it said.

“Finding additional gas reserves is a priority for Saudi Aramco, and our exploration program has yielded tremendous success over the years. We have set ourselves the goal of discovering between three tcf and seven tcf of additional non-associated gas reserves annually, a figure we far exceeded in 2009 by adding nearly 13.2 tcf,” the report said.

“We have made similar spectacular gains in the production of gas. In 1981, raw gas production was 1.65 billion cubic feet per day. In 2009, raw gas production reached 8.6 billion cubic feet, and for the first time… the production of non-associated gas was greater than the production of associated gas.  We project overall gas production levels to exceed 13 billion cubic feet per day by 2020.”

Saudi Arabia has the world’s fourth largest gas reserves after those in Russia, Iran and Qatar but a large part of them are associated with oil, making their separation a costly process. Increasing gas output also entails higher crude production, which will affect Riyadh’s commitment to OPEC’s output quotas.

Nearly a decade after they were awarded massive concession areas in the Empty Quarter (Rub Al-Khali desert), Shell and several other companies have failed to find major quantities of gas, prompting France’s Total oil giant to withdraw from the largest consortium in 2008.

SRAK is now equally owned by Saudi Aramco and Shell Saudi Ventures. Its concession covers 210,000 square kilometres, almost the size of Britain. Total had owned 30 per cent of the venture, while the Dutch Shell Group controlled 40 per cent and the rest was held by state-owned Saudi Aramco.

 

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