Saudi Arabia to drill for shale gas this year


Saudi Arabia to drill for shale gas this year


HONG KONG -- Saudi Arabia signaled Monday that it intends to remain a world energy powerhouse for the foreseeable future, partly by exploiting new technology which has unlocked vast quantities of oil and natural gas in North America.

Saudi Arabia, the world's largest exporter of crude oil, will push ahead this year with exploratory drilling of shale and other unconventional gas reserves which could be twice the size of its conventional gas reserves, which total 286 Tcf, Minister of Oil Ali al-Naimi said.

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Developing unconventional and renewable energy will allow Saudi Arabia to meet rising domestic demand for energy while maintaining crude-oil exports, Mr. al-Naimi said, adding that the kingdom "will not stint" in ensuring that its customers' oil needs are met.

"We have rough estimates of 600 trillion cubic feet of unconventional shale gas. The potential is very huge and we plan to exploit it," he said during a Credit Suisse CSGN.VX +0.04% conference.

Mr. al-Naimi didn't say how quickly Saudi Arabia might begin commercial production of shale gas or shale oil, or describe how it will supply the large amounts of water used in hydraulic fracturing, or "fracking," the process used to extract oil and gas from shale.
In separate comments to The Wall Street Journal, Mr. al-Naimi said he anticipated that the country's shale-oil reserves could also be exploited, but added that "we have to find them."

Saudi Arabia's lead over the U.S. in crude-oil production narrowed sharply in the past year, thanks to rising shale-oil output in the U.S., where crude production in November and December topped 7 million barrels a day for the first time in 20 years. Saudi output eased to 9.2 MMbopd in December, from 9.6 MMbopd the previous month.

The U.S. Energy Information Administration recently forecast that U.S. crude output will swell to 7.5 MMbopd within six months. The International Energy Agency, which represents key oil consumers, has predicted the U.S. will overtake Saudi Arabia as the world's largest oil producer by 2020.

Saudi Arabia is known more for its massive crude-oil exports than its modest gas output, and so far it hasn't managed to increase gas production enough to replace oil as feedstock in planned petrochemical or electricity-generating projects.

Natural gas output from state giant Saudi Arabian Oil Co., or Aramco, averaged 9.9 Bcf per day in 2011, up from 9.4 Bcf per day in 2010.

Aramco Chief Executive Khalid al-Falih said in December that the company plans to drill seven natural gas exploration wells in deep and shallow water in the Red Sea, off the coast of the northwestern city of Tabuk.
On Monday, Mr. al-Naimi said that prospects for global production of shale gas and oil—including in China, Ukraine, Poland and Saudi Arabia—were so promising that the kingdom might not need to continue with its decades-long policy of maintaining an oil-output cushion for use in global supply disruptions.

"It is not a question whether Saudi Arabia has spare [oil] capacity. It is a question of whether we need to spend billions maintaining it at all," Mr. al-Naimi said.

"New commercial reserves such as shale oil are good news for the global economy" and "will ensure even greater stability of markets and prices," he said.

Mr. al-Naimi said the hopes of "two or three" members of the Organization of Petroleum Exporting Countries that the pricing of crude oil in international trade will shift to a basket of currencies or the euro would not be realized.

"I don't think that is going to fly," he said.

Wall Street Journal


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