Saudi Aramco, Saudi Arabia’s state-owned oil giant, has announced that it will invest another $7 billion (£4.64 billion) in unconventional gas (shale) drilling in the country.
In mid-March 2013, The Saudi Minister of Petroleum and Mineral Resources Ali Naimi gave an estimate of over 600 trillion cubic feet of unconventional gas reserves, more than double its proven conventional reserves. That estimate would put Saudi Arabia fifth in a 32-country shale gas reserves ranking compiled for the U.S. Energy Information Administration.
However, the problem with all this abundance of unconventional hydrocarbons is that it requires fracking to get it out of the ground. And fracking requires water – lots of it. The water Saudi Arabia doesn’t have.
Another problem is that extracting shale gas from Saudi Arabia’s arid terrains is likely to be expensive and it is questionable whether Aramco will want to carry that expense trough the period of plummeting oil prices which, ironically, were in part caused by Saudi Arabia’s refusal to cut down its production.
And yet, speaking to Reuters, Saudi Aramco’s CEO Khalid al-Falih played down Saudi policy’s part in the tumbling oil price, saying: “The math will tell you that our exports … are gradually declining so the reason for the imbalance in the market absolutely has nothing to do with Saudi Arabia,” he said at a conference in Riyadh.
“I would not venture to guess where the (fair oil) price will be but it will be the price that ultimately balances supply and demand, and I don’t think that anybody, no single person can dictate what that price is. I will be foolish if I did that.”
“Supply and demand and the rules of economics will govern. It will take time for the current glut to be removed,” he continued. “Saudi Arabia will not single-handedly balance the market in a downturn,” he said, reiterating government policy.
With the current production at 9.8 million barrels a day, the highest since October, Saudi Aramco is the world’s largest oil company in terms of crude production and exports. Whether it can become a leader in unconventional production as well, remains to be seen.
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