Russia’s Lukoil to drill for Saudi unconventional gas

Saudi Arabia flag
Source: DollarPhotoClub

Russia’s oil and gas giant Lukoil is set to explore Saudi Arabian unconventional gas in the country’s challenging “Empty Quarter” desert region.

More than 10 years ago, Saudi Arabia invited international oil companies (IOCs) – such as Lukoil, Royal Dutch Shell and Sinopec – to find and pump gas in its south-east Empty Quarter, known as Rub al Khali. The companies failed to find commercially viable deposits, and the majority of them left the country. Lukoil, however, stayed.

In partnership with the state-owned Saudi Aramco, Lukoil is planning on drilling two evaluation wells at depths of up to 19,000 feet in the Mushaib tight gas field in the Empty Quarter.

“Drilling two wells shows that they are serious and positive about the region – and most importantly, that they are more committed than the other IOCs who already left,” said Sadad al-Husseini, a former top executive at Saudi Aramco.
“But they will have to find some Natural Gas Liquids and condensate to increase their profits and spread their costs.”

Saudi Arabia is eager to develop its unconventional gas resources to fulfil the country’s growing appetite for energy while saving oil for its lucrative exports. The country has over 600 trillion cubic feet of shale gas reserves, which is more than twice the amount of proven conventional natural gas reserves. However, developing Saudi Arabia’s tight and shale gas resources will be neither easy nor cheap.

Unconventional gas, such as tight gas and shale gas, is deposited at much greater depths than conventional resources – usually ranging between 8,000 to 10,000 feet – and requires multi-stage hydraulic fracturing to get the gas to flow. It is therefore not only much more expensive to explore than conventional resources, but also reliant on the availability of large quantities of water needed for fracking – a resource that is scarce in the arid country.

Saudi Aramco said in its 2013 annual review released on Thursday that it was developing new hydraulic fracturing technologies to increase recovery rates and improve cost efficiency. It cited “a CO2-based fracturing fluid as one of the techniques that may meet the water supply challenge.”
“Aramco is in the evaluation phase of shale gas and it’s an evaluation that requires large capital spending. Further development will happen based on results,” said Husseini.

“It seems that Lukoil wants to be a partner in the evaluation process.”

Oilfield service companies such as Baker Hughes, Schlumberger, Weatherford and Halliburton have all set up operations and bases in Saudi Arabia to help Aramco develop technology for unconventional gas.

“Aramco knows its reservoirs very well … in Saudi it (shale gas) will be more expensive than the U.S.,” Baker Hughes’ Chief Technology Officer Mario Ruscev told Reuters.
“It will be much more data driven and people will spend much more time in understanding exactly what they do before they spend a lot of money.”

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