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Saudi's associated gas needs limit its swing role

10 Mar 2017, 1.46 pm GMT

Saudi's associated gas needs limit its swing role

London, 10 March (Argus) — Saudi Arabia's ability to swing its crude output is limited by its need for associated gas to meet part of its demand for petrochemicals feed, oil minister Khalid al-Falih said.

"We cannot do what we did in the 1980s and 1990s by swinging in the millions of barrels to respond to market conditions," al-Falih said this week at the CeraWeek conference in Houston.

This is the first time a Saudi official has publicly stated the country's dependence on associated gas and cited it as a reason for limiting its ability to cut crude output in response to supply gluts.

As part of the Opec deal to curb production for the first six months of this year, Saudi Arabia pledged a cut of 490,000 b/d below October levels. Latest wellhead production data suggests Saudi Arabia is exceeding that by some distance.

State-owned Saudi Aramco, which produced 792mn ft³/d (8.16bn m³/yr) of ethane in 2015, has said it plans to boost its revenues from chemicals both domestically and abroad to $50bn/yr by the end of 2017. It is partly relying on feedstock from integrated refineries to achieve this, but it is also keen to expand its gas output.

Aramco's $20bn, 3mn t/yr Sadara joint venture chemicals plant with US firm Dow Chemicals started up in 2015, and supplying it with feedstock is one of Aramco's priority commitments. Aramco has said the plant uses naphtha from the company's refineries, a sign that not enough gas feedstock is available.

Aramco produced 11.6bn ft³/d (119.5bn m³/yr) of gas — both associated and non-associated — in 2015 and plans to boost output to over 20bn ft³/d (206bn m³/yr) by the end of 2025, which would mean gas meets over 70pc of the country's power generation and water desalination needs.

The company is reluctant to provide a breakdown of its gas output to show how much of it is associated. Aramco is producing gas from several onshore and offshore non-associated gas fields, but non-associated gas output is insufficient to feed the country's burgeoning demand for electricity and petrochemicals.

Saudi Arabia's need for gas is such that it has abandoned its long-held position that it will not import LNG, admitting such imports are a future possibility. And it is tapping its unconventional gas resources, mainly in the country's north and east.

Another gas-driven, long-held policy position Aramco is looking to abandon is its reluctance to invest in upstream projects abroad. Such investments, as and when they are made, would focus on joint ventures in unconventional gas, allowing the company to repatriate the know-how to deal with its own unconventional gas reserves.

Aramco also relies on some of its light oil fields to produce condensate. It commissioned a 2.4bn ft³/d natural gas liquids (NGLs) recovery plant at the Shyabah oil field in late 2015. The plant can produce up to 275,000 b/d of ethane and NGLs, contingent on Shaybah producing 1mn b/d. Aramco produced 228,000 b/d of condensate in 2015.

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