OPINION: Saudi Aramco’s decision to cancel multiple tenders comprising some of the initial facilities for its Jafurah gas scheme is likely to dent the prospects for unconventional and sour gas projects in the Middle East.
The Saudi government last year approved development of the Jafurah unconventional field, promising overall investments totalling $110 billion, but then cancelled all key tenders underpinning its early development phase in December, apparently signalling that the country is taking a new cautious approach to the scheme.
While Aramco says the cancellation is merely a cost-optimisation process, including measures such as utilising some of its existing surface facilities for processing gas from the Jafurah field, the decision clearly indicates that the project has taken a back seat.
Saudi Aramco has been cutting back on its capital expenditure plans since the Covid-19 outbreak and the ensuing economic downturn, and is trying to preserve cash.
The country is unlikely to pursue aggressive investments in unconventional and other technologically challenging gas fields in the near term, until global gas demand stages a strong recovery, industry experts say.
Other unconventional programmes in Saudi Arabia and the wider Middle East region are also expected to face challenges.
Abu Dhabi is still promising to spend more than $20 billion in developing the Hail & Ghasha Sour gas project, which comes with a high price tag and several challenges.
Aramco’s decision to hold fire on Jafurah could impact the expensive sour gas developments in the United Arab Emirates, where an investment decision is yet to be reached.
In addition, some of the international partners involved in the Ghasha concession also indicated that the project now needs a thorough review.
Both Saudi Arabia and the UAE were aiming to aggressively ramp up indigenous gas production, keeping pace with rising demand.
However, national oil companies could increasingly reassess the viability of some of the commercially challenging gas projects in the region, with an eye on imported gas options and other sources of energy.
(This is an Upstream opinion article.)