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4 Oil&Gas Middle East August 2013 www.arabianoilandgas.com

COMMENT

Oil&Gas Middle East met the Karan Gas field engineers this month to learn about the challenges faced by Aramco.

To subscribe to the magazine, please visit:www.ArabianOilandGas.com

Upcoming

stories in nextmonths issue ofOil&Gas MiddleEast magazine

[1]Saudi Arabia in ProfileSaudi Arabia continues to

dominate the world energy

map with consistent oil

production. What is next for

one of the fastest growing

GCC economies...

[2]OffshoreAs the offshore explorationand production market

grows alongside the

increasing volume of

sea-based hydrocarbon

transportation, OGME

covers different facets

including communication,

vessel building and

accommodation for the

offshore workers.

[3]Yards and Rigs

Which are the Middle Easts

biggest yards and how much

are they building? Who are

the chief suppliers in the

Yards and Rigs business ,

0(.&lOETPVU

New beginnings...WHY IS THE OIL RICH SAUDI ARABIAN ENERGY INDUSTRY PUSHING FOR SHALE?

What a month, it has been...With

summer and Ramadan, we were

expecting the industry to be rath-

er sombre. But between protests

in Egypt bolstering oil prices to new surprise

CEO announcements in the industry, it was

a packed month. The Egypt political tension

seeped through to the global oil market caus-

ing a price rally with worry over the possible

closure of the Suez Canal. We have an in-

depth coverage on the Egypt situation in the

issue. Our big feature this month is on SaudiArabias push for gas. While the Kingdom

has been rallying around gas for a while now,

shale gas research and exploration is finally

gaining traction in the rough Saudi terrain.

The countrys Oil Minister, Ali Al Niami,

has acknowledged the pressure on natural

gas, from rapid industrialisation and growing

young population, and said the Kingdom will

actively look for shale to free up the precious

crude for shipment. Technology majors like

Schlumberger and Halliburton have set up

research centres in the Kingdom to develop

methods of extraction with minimal water

usage. OGME also met the engineers behind

Saudi Aramcos Karan Gas Field, who gave

us an exclusive insight into the planning that

went in Aramcos first unassociated gas field.

This months issue also looks at the sudden

spike in demand for offshore jack-up rigs in

the region. The offshore industry in the Mid-

dle East is the most active it has been in a dec-

ade and that is pure music to the ears of the

jack-up rig operators. We spoke to a range

of rig operators to find out who their clients

are and what they are doing to stay ahead ofthe competition, especially from the Asian rig

operators and manufacturers. Do read our

feature on wireless instrumentation develop-

ments for the oil and gas industry too.

Lastly, the entire energy team joins me in

saying bye to Daniel Canty, the former edi-

tor, who steered the energy titles over the last

seven years and wish him the best in all his

future endeavours. We also wish all the read-

ers - Eid Mubarak!

Jyotsna Ravishankar

Editor

NEXTISSUE

>>>


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August 2013 Oil&Gas Middle East 41www.arabianoilandgas.com

COVER STORY

www.arabianoilandgas.com

The Kingdom of Saudi Arabia in early

2000 announced it had begun a search for

gas to replace oil as the burning fuel to

generate power in the country. This would

also potentially free up the precious oil for

shipment.

Saudi Arabia is the largest consumer of

petroleum in the Middle East, particularly

in the area of transportation fuels and di-

rect burn for power generation.

According to the US Energy Informa-

tion Administration (EIA), Saudi Arabia

was the worlds 13th largest consumer of

total primary energy in 2009; 60 per cent

was petroleum-based, with natural gas ac-

counting for most of the rest.

Saudi Arabia has set a goal of producing

almost half of its power from renewable

fuels by 2020 in order to meet domestic

power needs and to free up oil and natural

gas for export.

Saudi Aramcos CEO, Khalid Al-Falih

warned that rising domestic energy con-

sumption could result in the loss of 3

million barrels per day (bpd) of crude oil

exports by the end of the decade, if no

changes were made to current trends.

The Kingdom (including the Neutral

Zone) had proven natural gas reserves of

288 trillion cubic feet (tcf) at the end of

2012, fifth largest in the world behind Rus-

sia, Iran, Qatar, and the United States, ac-

cording to EIA estimates. About 5 tcf was

added in 2012, and over the last decade,

Saudi Arabia added over 60 tcf of natural

gas reserves.

To meet growing domestic needs for

additional production, the Petroleum Min-

istry and Saudi Aramco announced a $9

billion strategic push to add 50 tcf of non-

associated reserves by 2016 through new

discoveries (and potentially another 50 tcf

of associated reserves).

The national oil company has focused

heavily on major offshore gas develop-

ments in the Arabian Gulf. The most suc-

cessful project has so far been the Karan

gas project. Saudi Aramco began flowing

natural gas from Karan field in the Arabian

Gulf via subsea pipeline to the Khursani-

yah gas treatment plant onshore in Saudi

Arabia in 2011.

The project was ahead of schedule and

is today bringing two billion cubic feet

(bcf) of gas to stream. (See page 45 for an

indepth analysis of Karan gas field)

SAUDI ARABIA IN FOCUS

Are you a contractor working on oil and gas

projects in Saudi Arabia? If yes, we would like to

hear from you for our next issue of Oil&Gas Mid-

dle East (September) - which would be focused

on the Saudi Arabian oil and gas landscape.

Sauid Arabia is now pushed to keep looking for tight and sour gas in remote and difficult terrains to feed its gas-hungry industries and population.

766,000bpdSaudi Arabia burned 766,000 bpd of crude oil to generateelectricity in the period between June and August 2012.


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42 Oil&Gas Middle East August 2013

COVER STORY

But Aramco has announced in its annu-

al report that exploration and development

for more gas fields was also due to com-

mence in non-producing areas such as the

Red Sea, northern and western Saudi Ara-

bia, and the Nafud basin, north of Riyadh.

Everybody is talking unconven-

tional

Saudi Aramco also launched its Upstream

Unconventional Gas programme in 2011.

According to Aramcos 2011 report, the in-

tention is to increase production of raw gas

unprocessed natural gas to reach 15.5

bcf a day by 2015 from 10.2 bcf in 2010.

The international oil companies that ini-

tially participated in Saudi gas fields were

Shell, Lukoil, Chinas Sinopec, Italys Eni

and Spains Repsol.

But international enthusiasm has be-

gun to wane with majors, like Shell nego-

tiating for better prices at the Empty Quar-

ter. So, with budgets allocated and states

resolve in finding gas for its own growing

power generation, why was there no rushin exploration?

The Saudis need to raise prices to en-

courage new developments, Kamel al-

Harami, an independent oil analyst based in

Kuwait toldBloombergin a recent interview.

But they need at first to find enough

non-associated gas, or fields where the

fuel exists separately from oil.

The price of gas in Saudi Arabia is

regulated and set at $0.75 per million btu.

Industry estimates suggest companies

would need to receive around $5/mmbtu

in order to produce technically challenging

non-associated gas economically viable.

Arsalan Iqbal, senior consultant, Con-

tax partner says the reason Saudi Arabia

are pushed to looking for unassociated gas

fields is because of the OPEC quotas. If

you have to extract associated gas, then

you need to recover the oil, as well which

maybe in excess of the OPEC quota, so

that is the reason for Saudis push for un-

associated gas and even unconventional

reserves, he explains.

The problem with Saudi gas is that it is

very sour and in hard to extract reservoirs,

so international companies have little moti-

vation to continue looking for them, espe-cially with the current price points.

The solution to the gas conundrum in

Saudi Arabia now may very well lie in its

Shale reserves.

Roaa Ibrahim, an analysts with Manaar

Energy says the Kingdom has already be-

gan its effor ts to search for unconvention-

al hydrocarbons in the country.

Shale gas exploration progammes have

begun in the north-west targeted at the Si-

lurian (Qusaiba) shale; tight gas is being

searched in southern Saudi Arabia in theRub Al Khali (Empty Quarter) and south

Ghawar field with tight sand and carbon-

ate potential.

Hydraulic fracturing has greatly im-

proved gas production rates and recovery

rates from moderate to tight reservoirs,

she adds.

American oilfield services company,

Baker Hughes puts Saudi reserves of po-

tentially recoverable shale gas at 645 tril-

lion cubic feet, which would make them

the worlds fifth largest deposits.Ibrahim says in the north-west, Saudi

Aramco has already begun drilling shale

gas wells; however, to date, only one of the

shale gas wells has been fracked, she adds.

Aramco is planning on

adding 30 more rigs in

2013 to be deployed in

the Tabuk basin and the

Midyan basin in the Red

Sea. Tight gas is the tar-

geted resource play in Rub

Al Khali, notes Ibrahim.

The difficult terrain and

little-known geology in

the Rub Al Khali area

prompted 3 joint

ventures between

IOCs and Aramco:

South Rub Al

Khali (Shell and

Aramco), Sino-

Saudi Gas

The gas that was flared off previously is today the most precious resource in the Kingdom.

Arsalan Iqbal says

Saudi Arabia has

to keep looking for

unassociated

gas fields .

Gas is the fuel of

choice in the king-

dom, and combined

with gas liquids, sup-

plies 50 per cent ofthe companys de-

mand for energy and

chemicalsKhalid Al-Falih, CEO, Saudi Aramco.


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COVER STORY

www.arabi

Khalid Al-Falih, CEO, Saudi Aramco pushing for gas

(Sinopec and Aramco), Luksar (Lukoil and

Aramco).

For Saudi Arabia, gas is a big prior-

ity as they have to keep exporting oil. The

country is very strategic in its thinking,

MANPOWER CHALLENGES IN GAS PROJECTS

OGMEasked Petrofacs Christo Viljoen, Director, Engineering Solutions, Petrofac - Engineering,Construction, Operations & Maintenance Division the chief challenge in gas projects

With multiple projects being developed concur-

rently in the region, it invariably places a strain on

resources, particularly in the local labour market,

says Christo Vijoen, Petrofac.

With a strong emphasis on local content every-

where we work, the net result is that accessing

the required levels of expertise and experience

can be challenging.

Fortunately, he says, Petrofac has been able to

work early and with success in this space with its

Training Services business.

For example, in The Petrofac Training Centre in

Hassi Messaoud, Algeria, the company has the ca-

pacity to deliver training to 400 Algerian nationals

annually. In January, last year, Petrofac signed a

five- year contract to operate and manage a new

Construction, HSE and Drilling Training Centre in

Dammam, Saudi Arabia. The centre offers young

Saudi Nationals the opportunity to complete

internationally recognised vocational qualification

programmes and short up-skilling courses.

Given the rapid advancement of large facilities, the

interconnecting gas pipeline infrastructure is still

quite immature by comparison so getting gas from

A to B can throw up a number of challenges: for

example, multiple regulatory frameworks, cost to

develop etc.

Following the shale revolution in the United States,

Middle East countries also want to find and explore

shale gas reserves. Implementing this extractive

technology will not be without its challenges. It is

a highly water intensive process using fracking and

access to a skilled labour market may present chal-

lenges, he adds.

In 2009, the regions top contractor was awarded

the engineering procurement and construction (EPC)

contract for Saudi Aramcos Karan utilities and

cogeneration package.

The project formed part of the Karan gas develop-

ment programme which expanded the Khursaniyah

gas plant, located about 50 kms northwest of Jubail

in the Eastern Province of Saudi Arabia, to accom-

modate around 1.8 billion standard cubic feet per

day of high pressure sour gas from the offshore

Karan field.

In addition to building the utilities and cogenera-

tion package, Petrofac also upgraded the plants

process controls, electrical systems and support

facilities.

Notably this was the companys first project with

Saudi Aramco.

Christo Viljoen, director, engi-

neering solution, Petrofac

and has made it clear that heavy oil will run

the refineries and gas will used for power

generation. Saudi Arabia will aggressively

go on looking for gas. If its shale gas, they

will be looking for international partner-

ships. Shale gas will be Saudi Aramcosoutlook for gas, is my take, notes Iqbal.

Drilling for gas

A Barclays report on drilling reaffirms

the push for gas in the Kingdom. It said

the number of rigs active in the Kingdom,

climbed to 150 at the start of June, from

134 at the start of the year. Further a re-

port on Financial Times said Gulf industry

officials expect the Saudi rig count to top

200 this year or in early 2014.

While the escalation could be owing tothe large Manifa fields, it also means that

many wells are being drilled for gas. Ali Al

Niami, the Saudi oil minister and the most

vocal spokesperson from the gulf coun-

tries, has also reiterated that Saudi Arabia

will focus in shale this year. Reports sug-

gest that Saudi Aramco has asked Hallibur-

ton and Schlumberger to begin carrying

out feasibility studies for the production of

shale gas. Seismic surveys are currently

being carried out in the northern desertarea close to borders of Iraq and Jordan.

2012 Year in focus

The Aramco 2012 annual report says the

year was marked by three major finds.

Discoveries included one oil field Aslaf

and two gas fields Shaur and Umm

Ramil bringing Aramcos total oil and

gas field discoveries throughout history

to 116. Shaur was the companys first dis-

covery in the marine portion of the Red

Sea. Aramcos gas plants now have a gasprocessing capacity of 13.23 billion scfd. In

2012, as the company continued to pursue

new energy sources - The Unconventional

Gas Initiative will contribute to the com-

panys strategic intent in many ways. Saudi


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44 Oil&Gas Middle East August 2013 www.arabianoilandgas.com

COVER STORY

higher than most conventional gas, it is an

important strategic and economic choice

for the company.

Saudi Aramco is investing in innovative

technologies to reduce the higher cost of

producing unconventional gas, which of-

fers opportunities to more efficiently man-

age domestic demand, the report clearly

outlines. So, while the unassociated gas ex-

ploration may not have yielded favourable

results, the company is making a deter-

mined push with is shale gas exploration.

Will hydraulic fracking be possible in

Saudi Arabia is the next logical question,

with the need for huge volumes of water

in the procedure. But as a country that re-

mains on the global energy map as one of

the most important oil exporters, it will not

be long before Saudi Aramco finds a way

around this problem. As a senior executive

from Schlumberger, recently told dele-

gates at a Bahrain conference, Its here in

Saudi Arabia where we are developing our

best technology. We are trying to find so-

lutions to produce shale gas in Saudi Ara-

bia with the least amount of water, Aaron

Gatt, characterization group president at

Schlumberger told the audience at a Ma-

nama conference, earlier this year.

The growth of its petrochemical indus-

tries and sustainable power generation

hinges on the discovery of more gas and it

must be found at any cost, is the industry

consensus.

Arabias supplies of unconventional gas

will supplement its supplies of convention-

al gas resources and help meet the King-

doms energy demand, the report says.

The report argues that although the

cost of delivered unconventional gas is

Karan gas filed is Saudi Arabias first unassociated gas field commercialised successfully.

Its here in Saudi

Arabia where we are

developing our best

technology. We are

trying to find solutions

to produce shale gas

in Saudi Arabia with

the least amount ofwaterAaron Gatt, Schlumberger.

152bcmby 2022, business monitor interna-tional reports the Kingdom could

reach this figure in gas prodn.

MOUNTING FUEL BILLS

According to the Saudi Electricity Regulatory

Authority (ECRA), demand for power has risen by

7 per cent to 10 per cent annually during the past

five years, one of the highest growth rates in the

world. To meet the growing demands, Saudi has

been importing diesel. But this year these imports

have reached a record high of up to 8.9 million

barrels of diesel in June. At roughly $120 per bar-

rel, this is costing the government more than $1

billion per month in diesel imports alone.

According to a London-based international report

by Chatham House Saudi Arabias place in the

world oil market is threatened by unrestrained

domestic fuel consumption. In an economy domi-

nated by fossil fuels and dependent on the export

of oil, current patterns of energy demand are not

only wasting valuable resources and causing ex-

cessive pollution, but also rendering the country

vulnerable to economic and social crises.

Roaa Ibrahim is an analysts with Manaar Energy.


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COVER STORY

Behind the ScenesOGMESPEAKS TO SAUDI ARAMCO ENGINEERS TO DELVE INTOTHE CHALLENGES IN DEVELOPING THE COUNTRYS FIRST NON-ASSOCIATED GAS FIELD KARAN

A new beginning dawned in the annals of Saudi

Aramcos gas history last year. The first gas

from Karan the companys first offshore non-

associated gas field project started flowing full

time and was transported by a subsea pipeline to

the onshore Khursaniyah Gas Plant. Discovered in

April 2006, Karan is the first non-associated gas

field in Saudi territorial waters in the Arabian Gulf,

160 kilometers north of the companys headquar-

ters in Dhahran.

Offshore facilities at Karan consist of five produc-

tion platform complexes connected to a main tie-in

platform, installed with associated electrical power,

communication and state-of-the-art remote monitor-

ing and control facilities for safe and reliable opera-

tions from onshore.

Detailed design work began in 2008. The field

was discovered when the Karan-6 well drilled into

Khuff formations, finding gas in carbonate reser-

voirs laid down from 200 to 300 million years ago

in the Permian and Triassic periods. With Khuffs

gross thickness of up to 1,000 feet, Karans is the

thickest Khuff reservoir section ever encountered

in Saudi Arabia. The Khuff formation is considered

high pressure and temperature at a depth below

10,000, and Karan lies in medium-depth waters of

40-60 meters.

OGME spoke to the Gas Reservoir Management

Department (GRMD) Manager Adnan Al-Kanaan and

senior consultants, Dr. Zillur Rahim and Michael Haas

about the non-associated gas development in general

to find out about technology application and chal-

lenges associated with the Karan offshore field.

Al-Kanaan heads a group of 80 engineers and

technologists in GRMD, who, with the support and

assistance of other Engineering and Geoscience

Departments, are responsible for the planning and

development of the gas fields in Saudi Arabia.

The gas development programme is a major

contributor to the Kingdoms economy to maintainand support all domestic Saudi Arabia infrastruc-

ture, from steel and cement factories and electricity

generation to desalination and petrochemical

plants, said Al-Kanaan.

With the continuous increase of domestic en-

ergy demand, exploration, drilling, and production

activities are on the rise. Karan field has been a

major discovery added to the portfolio of our gas

projects, he added.

The field was fast tracked and was put on

production within five years of discovery. . Once

the formation breaks down, it was difficult to heal

losses and drill ahead. Hence, all precautions were

undertaken ahead of time to avoid drilling chal-

lenges, said Dr. Rahim. A 110-kilometer subsea

pipeline is transporting Karan gas to onshore pro-

cessing facilities at the Khursaniyah Gas Plant.

The onshore facilities also include a cogenera-

tion plant, a sulfur recovery unit with storage tank,

substations and a transmission pipeline linked to

the Kingdoms Master Gas System (MGS). Karan,

is designed to produce 1.8 billion standard cubic

feet per day (SCFD) of raw dry gas.

On the challenges in this particular project,

the wells were initially planned to be drilled as

extended reach off multi-slot platforms. The well

trajectories were changed to S-shape to minimize

loss circulation, while drilling across the massive

naturally fractured Khuff reservoir without impact

on field gas offtake production or well stability,

said Haas. In addition, the wells were completed

with pre-perforated un-cemented liners, Haas

added, that saved time and cost without impact-

ing wellbore integrity and production.

Much of the equipment was fabricated in-

Kingdom, from high-pressure vessels and injection

skids to fusion epoxy pipe coating. The majority of

construction work for the plant was also executed

by local contractors, Aramco said.

This is Saudi Aramcos first offshore non-associ-

ated gas development. The success of this project

and lessons learned have led to other discoveries

and developments that have taken Karan lessons

and experiences and converted them into new best

practices for future developments.

The gas is transported

by a subsea pipeline to

the onshore Khursaniyah

Gas Plant.

The Dream Team - (L-R) - Michael Haas, Dr.Zillur Rahim,

AbdulRahman, Adnan Al-Kanaan (Manager), Mustafa

Basri, Danah Alsana, Abdullah Utaibi

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