Saudi Aramco Sees Red Sea, Jalameed Gas Flowing This Decade, CEO Says

Saudi Aramco, the world’s largest state-run oil company, plans within this decade to produce natural gas at new fields in northern Saudi Arabia and off the Red Sea coast, Aramco’s chief executive officer said.

“We’ve done quite well, and in the last few years we’ve made some significant discoveries,” Khalid Al-Falih said in a Bloomberg Television interview on Dec. 8. “We have made discoveries in the north of Saudi Arabia in a place called Jalameed. We’re exploring very aggressively in the Red Sea.”

Saudi Arabia, the biggest exporter of crude, wants to increase domestic supplies of gas to provide power for energy- intensive industries such as petrochemicals and metals manufacturing. Aramco is investing in gas “like never before” to bring the fuel to market quickly and free up the more valuable crude oil that Saudis have been burning to generate electricity and desalinate seawater, al-Falih said.

“By the middle of this decade, you should see them coming to fruition,” al-Falih said of the northern gas deposits. Fields off the country’s western coast would start producing after 2015, he added. Aramco plans to begin drilling for gas in shallow waters of the Red Sea next year before moving on to deeper wells in 2012.

“That will be a key exploration program for us because most of the demand is happening in the western region,” he said. “If gas is available there, that would alleviate a lot of the liquid burning.”

Preliminary reservoir tests of the Jalameed Well 3 showed commercial potential, with gas flowing at a rate of 12.1 million cubic feet a day, Saudi Oil Minister Ali Al-Naimi said when announcing the discovery in February.

Reliance on Crude

Aramco is also looking to refineries and petrochemical factories to contribute to economic growth and reduce Saudi Arabia’s reliance on oil for 85 percent of government revenue. Access to domestic sources of gas has given Persian Gulf chemical makers a price advantage over rivals elsewhere, and producers are turning to naptha and other refinery by-products to feed new plants.

“The potential in petrochemicals is unlimited in the long run,” al-Falih said.

Aramco is investing about $40 billion in three refining and petrochemical projects that together will add more than 8 million metric tons a year to the country’s annual petrochemical capacity of about 50 million tons.

The company plans to build two of these projects at the city of Jubail on the Persian Gulf. One is a 400,000 barrel-a- day plant that Aramco is developing jointly with Total SA of France. It will cost $12 billion, including financing, the venture’s former Chief Executive Officer Salem Shaheen said in March. Dow Chemical Co. is Aramco’s partner in the second Jubail facility.

‘Big Story’

“The big story for us is our joint venture with Dow,” al- Falih said. Aramco and Dow expect to make an investment decision next year and to start production in about 2015. Investment in the venture “is approaching $20 billion,” al-Falih told reporters at a petrochemicals conference in Dubai last week.

Aramco has committed $6 billion to $8 billion to expand a third major petrochemical project called Rabigh Refining and Petrochemicals Co.

Aramco wants separately to build two refineries, at Yanbu on the Red Sea and at Jazan, farther south along the coast near the border with Yemen. The Yanbu refinery is to have a refining capacity of 400,000 barrels a day.

The company has awarded construction contracts for the Yanbu plant and for the Aramco-Total facility at Jubail. It is conducting engineering and design studies for the Jazan refinery, al-Falih said.

“These are mega-refineries. Each of them will have the opportunities to have petrochemicals associated with them.”

To contact the reporters on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net Lara Setrakian in Dubai at

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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