Saudi to embark on largest energy investment plan

Saudi Arabia is on the verge of carrying out its largest hydrocarbon investment plan aimed at boosting gas resources and expanding its fast growing refining and petrochemical industry, according to its state oil operator.

The five-year plan comes after the Gulf Kingdom's has just completed a mammoth capital programme that involved pumping of nearly $100 billion into crude oil capacity expansion as well as gas and other hydrocarbon sectors.

Saudi Aramco, the world's largest oil producing company which controls over a fifth of the global crude resources, said the plan would target increasing its gas reserves, which it put at around 276 trillion cubic feet.

Addressing an energy conference in Montreal, Canada last week, Saudi Aramco President and Chief Executive Officer Khalid Al Falih said the previous investment programme added more than 45 trillion cubic feet to the country's gas wealth, the world's fourth largest after that in Russia, Iran and Qatar.

He said the gas expansion plan would target reserves from deep offshore, sour gas, shale gas and tight gas reservoirs in addition to conventional onshore gas.

"All of those efforts ensure that we will continue to provide vital petroleum energy to the world for generations to come. Furthermore, we are making large investments in expanding our refining capacity, and are also integrating world-class petrochemical facilities with some of our major refineries," he said.

"In fact, over the next five years we are undertaking perhaps the most ambitious capital programme in the petroleum industry, with the lion's share of those funds directed to the gas and downstream oil sectors."

He said the programme is designed to allow Saudi Arabia to continue to play its role "vigorously and responsibly" in furthering the reliable supply of vital hydrocarbons to the world. "I am confident the positive impact of these massive investments will continue to be felt for many decades."

In its 2009 report, Saudi Aramco said intensified exploration and new  recovery technology would boost its gas production by more than 50 per cent in 2020 to allow the world's oil superpower to meet soaring domestic demand.

Massive investments in exploration and drilling programmes have already resulted in a sharp rise in the Gulf Kingdom's natural gas reserves to nearly 276 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, Aramco 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," it 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."

Falih did not specify investments in the new plan or say whether Saudi Aramco had already embarked on the programme, which follows the completion of a $100-billion scheme in the country's hydrocarbon industry in the past years.

Aramco said it had channeled those funds into oil and gas output capacity expansions, petrochemicals, refining and associated projects.

The Company said the programme, one of the largest capital plans in the Gulf Kingdom's history, had added nearly 3.8 million bpd to the country's crude output capacity, including around two million bpd in 2009 alone.

In his address, Falih said traditional fossil fuels would continue to be the main source of energy to the world for the coming decades.

"We will have to meet the world's increased energy needs, and must do so in the most responsible manner.  So how do we best address the challenge of ready access to affordable energy...the short answer is that the world will continue to rely on traditional fossil fuels for most of its energy needs for the coming decades......in fact, these energy sources-namely coal, oil and natural gas- are expected to account for about four out of every five units of energy that mankind will consume for the foreseeable future," he said.

"In addition, even though the share of fossil fuels in the energy mix may decline over the longer term, the absolute quantities of energy from these sources will continue to rise simply because total energy demand is set to expand so significantly....at the same time, alternative sources of energy should grow-and indeed must grow-in order to play their part in meeting that rising demand."

Falih said that while development of renewables and more energy efficient technologies should be encouraged, the growth of such sources is likely to be slow and uneven due to a range of daunting technological, economic, environmental, infrastructure and consumer acceptance issues.

"Furthermore, we need to make a complete and rational assessment of alternatives, including their realistic deployment rates, the comparative economics of energy sources and technologies, and their total environmental impact.   For example, prospects for many biofuels have been dimmed by rising food prices, high carbon emissions over their life-cycle, and ethical concerns over using land, water and energy to grow crops for fuel rather than food," he said.

"The high cost and intermittent nature of wind and solar means they must be part of a broader and more stable system utilizing conventional energy sources, and when it comes to nuclear, there are lingering concerns regarding plant safety and the safe disposal of spent fuel," he added.

He said plug-in hybrid and electric vehicles must still overcome issues related to battery charging time and driving range, initial vehicle cost, and the need to draw their electricity from environmentally sound and sustainable sources.

"It is no good driving a zero-emissions electric car if the juice for the batteries comes from an outdated, inefficient, coal-fired power plant somewhere over the horizon, which simply increases emissions and transfers them from vehicle tailpipes to power plant smokestacks," he said.

"We must also consider the roughly one billion motor vehicles currently on the road, as well as the massive existing industrial, commercial and residential equipment and facilities based on proven petroleum technologies-meaning that even when alternatives do become viable, it will take a long time to displace this existing base."
 

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