Saudi Arabia to begin drilling for shale gas this year
By SIMON HALL
HONG KONG -- Saudi Arabia signaled Monday that it intends to remain a world energy powerhouse for the foreseeable future, partly by exploiting new technology which has unlocked vast quantities of oil and natural gas in North America.
Saudi Arabia, the world's largest exporter of crude oil, will push ahead this year with exploratory drilling of shale and other unconventional gas reserves which could be twice the size of its conventional gas reserves, which total 286 trillion cubic feet, Minister of Oil Ali al-Naimi said.
Exploiting unconventional and renewable energy will allow Saudi Arabia to meet rising domestic demand while maintaining crude-oil exports, Mr. al-Naimi said, adding that his country "will not stint" in ensuring that its customers' oil needs are met.
"This year alone we are going to test seven wells for shale. We have rough estimates of 600 trillion cubic feet of unconventional shale gas. The potential is very huge and we plan to exploit it," he said during a Credit Suisse conference.
Mr. al-Naimi didn't offer a forecast of how quickly Saudi Arabia might achieve commercial production of shale gas or shale oil, or describe how it will supply the large amounts of water used in hydraulic fracturing, or "fracking," the process used to extract oil and gas from shale.
In separate comments to The Wall Street Journal, Mr. al-Naimi said he anticipated that the country's shale-oil reserves could also be exploited, but added that "we have to find them."
Saudi Arabia has seen its lead over the US in crude-oil production narrow sharply in the past year, thanks to rising shale-oil output in the US, where crude production in November and December topped 7 million bpd for the first time in 20 years. Saudi output eased to 9.2 million bpd in December, from 9.6 million the previous month.
The US Energy Information Administration recently forecast that US crude output will swell to 7.5 million bpd within six months. The International Energy Agency, which represents key oil consumers, has predicted the US will overtake Saudi Arabia as the world's largest oil producer by 2020.
Saudi Arabia is known more for its massive crude-oil exports than its modest gas output, and so far it hasn't managed to increase gas production enough to replace oil as feedstock in planned petrochemical or electricity-generating projects.
Natural gas output from state giant Saudi Arabian Oil Co., or Aramco, averaged 9.9 billion cubic feet/day in 2011, up from 9.4 billion cubic feet/day in 2010.
Aramco CEO Khalid al-Falih said in December that the company plans to drill seven natural gas exploration wells in deep and shallow water in the Red Sea, off the coast of the northwestern city of Tabuk.
On Monday, Mr. al-Naimi said that prospects for global production of shale gas and oil--including in China, Ukraine, Poland and Saudi Arabia--were so promising that the kingdom might not need to continue with its decades-long policy of maintaining an oil-output cushion for use in case of global supply disruptions.
"It is not a question whether Saudi Arabia has spare [oil] capacity. It is a question of whether we need to spend billions maintaining it at all," Mr. al-Naimi said.
"New commercial reserves such as shale oil are good news for the global economy" and "will ensure even greater stability of markets and prices," he said.
Mr. al-Naimi said that the hopes of "two or three" members of the Organization of Petroleum Exporting Countries that the pricing of crude oil in international trade will shift to a basket of currencies or the euro would not be realized.
"I don't think that is going to fly," he said.
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