Saudi Arabia’s Shale Plans May Be Slowed by Lack of Water

Saudi Arabia may need at least a decade to develop shale-gas production to a scale comparable to the U.S. because of the desert kingdom’s short supplies of water, state oil company officials said.

Shale gas is produced by a technique known as hydraulic fracturing, or fracking, in which massive amounts of water, chemicals and sand are blasted underground to free trapped hydrocarbons. Finding the necessary amount of water in the regions where Saudi Arabian Oil Co. is exploring for shale gas will be difficult, according to Amin Nasser, senior vice president of upstream at the company known as Saudi Aramco.

“The infrastructure cost will go down with time,” he said March 10 at an oil and gas conference in Manama, Bahrain. “But water is going to remain a challenge.”

Saudi Arabia may hold as much as 645 trillion cubic feet of technically recoverable shale gas, the world’s fifth-largest deposits, behind China, the U.S., Argentina and Mexico, according to estimates by Baker Hughes Inc. (BHI) The kingdom also has about 282.6 trillion cubic feet of proven conventional gas reserves, according to Aramco’s 2011 annual report.

Shale gas production in the U.S., which has about 862 trillion cubic feet of recoverable shale gas, is forecast to grow to 16.7 trillion cubic feet in 2040 from 7.8 trillion cubic feet in 2011, according to the U.S. Energy Information Administration. That increase will account for almost all of the growth in total U.S. natural gas production to 33.1 trillion cubic feet from 23 trillion during that period, the EIA said in its Annual Energy Outlook 2013.

International Help

“We need to build our knowledge and experience and mobilize resources, and all this will take time,” Waleed al- Mulhim, manager at Aramco’s southern area reservoir management department, said yesterday at the conference. “We can’t simply replicate what’s happening in the U.S., as we have different challenges.”

Halliburton Co. (HAL), the world’s largest provider of hydraulic- fracturing services, and fellow oil and gas service companies Baker Hughes Inc. and Schlumberger Ltd. (SLB) are all operating research centers in Saudi Arabia to develop technology to help the country unlock its unconventional hydrocarbon resources.

“It’s here in Saudi Arabia where we are developing our best technology,” said Aaron Gatt, characterization group president at Schlumberger. “We are trying to find solutions to produce shale gas in Saudi Arabia with the least amount of water,” he told the conference yesterday.

Kuwait Oil

Kuwait Oil Co. has identified a shale gas deposit and it will “soon” venture into developing the resource, Chairman and Managing Director Sami al-Rushaid told the same conference, without disclosing any details. The company also plans to expand development of sour, or high-sulfur, gas deposits, to nearly triple the production capacity to 2.5 billion cubic feet a day of gas by 2030, he said.

Kuwait lacks the experience to develop more challenging unconventional gas resources on its own and it must resort to international oil companies, said Kamil al-Harami, an independent oil analyst based in Kuwait.

“If the Kuwaitis don’t specify a deadline for the project and don’t seek help from international companies, then their plans to develop the shale and sour gas deposits are just daydreams,” he said by phone.

Saudi Aramco is drilling for sour gas in the Empty Quarter desert with Royal Dutch Shell Plc (RDSA), while Kuwait postponed similar deal with Shell after lawmakers raised questions about the contract to develop the challenging natural-gas fields in the country’s north.

To contact the reporter on this story: Wael Mahdi in Manama at wmahdi@bloomberg.net

To contact the editor responsible for this story: Raj Rajendran at rrajendran4@bloomberg.net

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