Operations at Saudi Arabia’s Jafurah shale gas field – the country’s largest unconventional non-oil associated gas site and arguably one of the biggest outside the U.S. – will begin this year, according to a comment last week from Saudi Aramco’s president and chief executive officer, Amin Nasser. The oil and gas giant added that Phase 1 is expected to produce 200 million standard cubic feet per day (Mscfd) of gas this year, with the figure set to rise to 2 billion standard cubic feet per day (Scfd) by 2030. The projected numbers would mark around a 60% increase in Aramco’s gas output capacity, enabling it to meet rising domestic power demand. It could also allow it to reduce the level of crude oil burned in power generation that might be monetised by exporting it, and lay the foundations for significant gas exports in the future as well. The key question for dedicated Saudi Arabia watchers arising from any such statement from the Kingdom over the years is simply how much of it is true?
To begin with, reserve and production numbers have long been a troublesome area for Saudi Arabia, as analysed in full in my latest book on the new global oil market order. At the beginning of 1989, Saudi Arabia claimed proven oil reserves of 170 billion barrels but only a year later, and without the discovery of any major new oil fields at all, the official reserves estimate somehow grew by 51.2%, to 257 billion barrels. Relatively shortly after that, Saudi Arabia’s proven oil reserves increased again, this time to just over 266 billion barrels, again without the discovery of any major new oil fields. Proven oil reserves increased once more in 2017 to 268.5 billion barrels, again with no new major oil finds being discovered. Over the period that these increases were announced, the country was extracting an average of 8.162 million bpd. Therefore, from 1990 (the year in which Saudi Arabia’s claimed proven oil reserves jumped from 170 billion barrels to 257 billion barrels), to 2017 (the year when Saudi Arabia was claiming proven oil reserves of 268.5 billion barrels), the Kingdom had physically removed from the ground forever an average of just over 2.979 billion barrels of crude oil every year.
The total amount of crude oil permanently removed from the beginning of 1990 to the beginning of 2017 was, therefore, 80.43 billion barrels. In short, from 1990 to 2017, Saudi Arabia’s official crude oil reserves number had gone up 98.5 billion barrels, despite there being no new oil finds and it physically removing 80.43 billion barrels forever. A similar pattern appears to be emerging in Jafurah’s reserves. In early 2024, an additional 15 trillion standard cubic feet (Tscf) of gas deposits were suddenly stated as proven. If true, this would put its total reserves at around 229 Tscf, or about 6.5 trillion cubic metres (Tcm). By comparison, total proven gas reserves for Russia are about 48 Tcm, for Iran around 34 Tcm, and for Qatar nearly 24 Tcm.
The Kingdom’s stated production numbers and, as a corollary of this ‘spare capacity’ figures, have also been problematic. A representative case in point was the statement by Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman at the time of the landmark 14 September 2019 attacks against two of its key oil facilities (Abqaiq and Khurais) that “the Kingdom plans to restore its production capacity to 11 million bpd by the end of September and recover its full capacity of 12 million bpd two months later.” Both figures were grossly inflated. In reality, Saudi Arabia averaged crude oil production of just 8.151 million barrels per day (bpd) from 1973 to 14 September 2019. It had never produced anywhere near 12 million bpd at that point and had only briefly (in November 2018) averaged 11 million bpd (11.093 million, to be precise). Little has changed since then. Average Saudi Arabian crude oil production from 1973 to close of business yesterday was 8,278,650 bpd. Despite its often-repeated comments about a maximum sustainable crude oil capacity of 12 million bpd, again it has achieved this figure only once (in April 2020) and the country was unable to sustain it.
Crucially as well is that the Energy Information Administration (EIA) defines spare capacity as “the volume of production that can be brought on within 30 days and sustained for at least 90 days”. In the aftermath of the 14 September 2019 attacks it became clear that the Saudis had side-stepped the official meaning of ‘spare capacity’ to encompass not just what the EIA defined it as but also to include the utilisation of crude oil supplies held in storage at any given time in the Kingdom. It also included any supplies it could buy in from elsewhere, plus any it could withhold from contracts and re-direct into storage facilities. Consequently, there has been scepticism over Saudi Arabia’s short- and long-term production projections for Jafurah too.
That said, supposing these numbers are correct, would they enable Saudi Arabia to become a significant gas exporter by 2030 as the Kingdom is targeting, and reduce the burning of valuable crude oil into the bargain? EIA data shows the country burned well over 500,000 barrels per day of crude oil in the second half of last year. The plan is that production from Jafurah will reach 2 billion Scfd of gas by 2030. All other factors remaining equal, one billion cubic feet of gas equals 0.167 million barrels of oil equivalent, so 2 bcf/d equals 0.3340 million barrels of oil equivalent, or 334,000 barrels. Therefore, the total projected new amount of gas to come from Jafurah by 2030 is around 334,000 barrels per day, which is not even enough to cover the current amount of oil – more than 500,000 bpd - being burned for power generation in Saudi Arabia, never mind any increase in demand between now and 2030.
By Simon Watkins for Oilprice.com
