Aramco extends bidding for shale gas work while country looks for efficiencies

Saudi Arabia flag
Source: DollarPhotoClub

Saudi Aramco – the state-owned energy giant from Saudi Arabia and the world’s biggest oil company – has again extended the deadline for companies to bid for unconventional oil and gas exploration in the north of the country.

The bid date was initially set for December 2014 but it was postponed several times, the latest date being set for 15th March.

“They extended – the bid closing date now is in March,” a source told Reuters, adding that Saudi Aramco had sent companies additional requirements that would need their study.

International companies are invited to bid for services on two major projects: System A involves building processing facilities, wellheads and pipelines for gas in Turaif, where a big mining project called Waad al-Shamal is under development. System B, which – it is alleged – is five times as big as System A, is an unspecified unconventional gas projects involving pipelines.

Saudi Arabia – the world’s second-biggest, after Russia, oil producer – has taken a keen interest in unconventional oil and gas deposits as it needs to contend with a sharp rise in domestic demand for power, not least from the energy-hungry petrochemical industry.

As Reuters reports, Saudi Aramco’s chief executive Khalid al-Falih told a conference in Riyadh last month that Aramco had invested $3 billion in developing unconventional gas resources and had earmarked an additional $7 billion for it.

He did not reveal detailed plans, but said: “Saudi Arabia will be the next frontier after the U.S., where shale and unconventional will make a significant contribution to our energy mix, especially gas.”

There is certainly a lot to fight for. 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, oilfield companies expecting rich pickings in Saudi Arabia might be disappointed as the country is in a phase of aggressive cost-cuttings. The country, which derives most of its income from oil and gas extraction, is trying to put a cap on its spending in the face of low oil prices.

According to the Wall Street Journal, Saudi Aramco is considering slashing its future spending on production and exploration by as much as 25 per cent, much like private oil companies.

“Like everyone else, we’re using the downturn as an opportunity to sharpen our fiscal discipline,” Aramco CEO Khalid Al Falih said in public remarks during the World Economic Forum in Davos in January. “We’re cutting on a few things that we could cut, but we’re as committed as ever to our long-term strategy.”

According to industry sources quoted in the WSJ, Aramco executives are considering slashing production and exploration spending to $30 billion a year from $40 billion while oil prices remain low.

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