Saudi Arabia’s sudden enthusiasm for developing its vast shale resources – led by the giant Jafurah basin – is rooted in a heady mix of energy security, export optimization and geopolitical positioning. Riyadh wants to reduce still-burning crude for energy, free up more barrels for export at a time of tight OPEC+ management, and secure new raw materials for its expanding petrochemicals and industrial base. At the same time, the Kingdom is acutely aware that the US shale boom has changed global energy markets and eroded OPEC’s pricing power, and is determined not to be left behind in the next phase of unconventional development. With Jafurah holding one of the largest unconventional gas endowments in the world, Saudi Arabia is presenting the field as the cornerstone of a new era of domestic supply growth and future export potential, with a recent announcement that it will export its first condensate from the Jafurah gas plant in February. That said, there is often a large gap between Saudi Arabia’s projections of key numbers, including oil reserves and production, and reality, and a careful analysis of the Jafurah project reveals deep gaps in the projections here as well.
With approximately 229 trillion standard cubic feet (Tscf) of natural gas and 75 billion barrels of condensate, the US$100 billion Jafurah project is expected to produce 200 million standard cubic feet per day (Mscfd) of gas in Phase 1, with the figure set to rise to 2 billion standard cubic feet per day. an increase of approximately 60% in Aramco’s gas production capacity, while the company’s ultimate goal is to boost its gas production by 80% by 2030. Energy needs driven by heat waves will drive 40-50% of incremental global gas demand by the end of 2040 at a minimum. Additionally, according to industry projections, by that time data center-related demand could increase 150-200 billion cubic meters per year globally, a 3.6-4.9% increase over current global gas demand projections. Saudi Arabia intends to position itself as a major Middle East player in this high growth and geopolitically critical segment. Overall, Aramco said its unconventional gas program at peak production is expected to generate electricity equivalent to displacing 500,000 barrels per day (bpd) of oil. Another positive for Saudi Arabia in this equation is that because Jafurah is primarily a gas project, it should not be counted against Saudi Arabia’s OPEC production quota.
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All of this looks good on paper, as do all of Saudi Arabia’s major predictions related to its oil and gas sector. But, as ever, the reality is somewhat different. The main reason for this is Saudi Arabia’s influence in the world rests almost entirely on its oil and gas reserves and associated production numbers — the more they appear, the greater its geopolitical weight. Consequently, it has never been more in the interest of any country to talk about anything than it is in Saudi Arabia to overinflate these key figures, as fully analyzed in my latest book on the new order of the global oil market. For example and right from the start, 1989 saw Saudi Arabia claim proven oil reserves of 170 billion barrels. But just one year later — without the discovery of any new large oil fields or major re-verified evaluations of reserves in existing fields — the official estimate somehow grew by 51.2%, to 257 billion barrels. Shortly after that, and again without any major new discoveries, Saudi Arabia’s proven reserves rose to just over 266 billion barrels, rising again in 2017 to 268.5 billion barrels. During the period in which these increases were announced, the country was extracting an average of 8.162 million bpd. Thus, from 1990 (the year in which Saudi Arabia’s proven oil reserves jumped from 170 billion barrels to 257 billion barrels), to 2017 (the year when Saudi Arabia was claiming proven oil reserves of 268.5 billion barrels), the Kingdom had physically removed from the ground forever an average of just over 2 billion barrels of crude oil annually. The total amount of crude oil removed permanently from the beginning of 1990 to the beginning of 2017 was, therefore, 80.43 billion barrels. In short, from 1990 to 2017, the official number of Saudi Arabia’s crude oil reserves had increased by 98.5 billion barrels, even though there were no new oil discoveries and physically removed 80.43 billion barrels forever.
Equally questionable are the Kingdom’s stated production numbers and, by extension, its claims about excess capacity. A representative case came after the attacks of 14 September 2019 on the Abqaiq and Khurais facilities, when the Minister of Energy Prince Abdulaziz bin Salman stated that “the Kingdom plans to restore its production capacity to 11 million bpd by the end of September and recover its full capacity of 12 million bpd two months later.” Neither figure was remotely accurate. In reality, Saudi Arabia averaged crude oil production of only 8.151 million barrels per day (bpd) from 1973 to September 14, 2019. At that point it never produced close to 12 million bpd and only briefly averaged 11 million bpd once — in November 2018, in November 2018, in the point, very little has changed. Saudi Arabia’s average crude oil production from 1973 to the close of business yesterday was 8,297,440 bpd. In addition to this, despite the oft-repeated comments about a maximum sustainable crude oil capacity of 12 million bpd, once again, it achieved this figure only once (in April 2020) and could not maintain it. Also crucial is that the Energy Information Administration (EIA) defines spare capacity as “the volume of production that can be brought within 30 days and sustained for at least 90 days”. After the September 14, 2019 attacks, it became clear that Saudi Arabia had quietly redefined “excess capacity” to include not only what met the EIA definition but also crude held in storage, crude it could buy elsewhere, and crude it could keep from contracts and redirect to storage.
This trend of strategic grandiosity seems to be playing in its Jafurah numbers as well –unsurprisingly, since it is a key part of the main drive of the Kingdom’s shale energy, and therefore subject to the same motivation as its other two main sectors. In early 2024, an additional 15 Tscf of gas deposits were suddenly declared proven, bringing the official total to 229 Tscf. Even assuming this is accurate, the question remains: is it enough to reduce crude burning to the levels predicted by the Saudis and at the same time allow the Kingdom to become a significant exporter of gas by 2030? EIA data shows the country burned well over 500,000 bpd of crude oil in the second half of 2024 and industry estimates suggest it burned about 470,000 bpd in 2025. Two billion standard cubic feet per day of gas – the targeted production of Jafurah with 2030 million or 3340 barrels of oil equivalent. 334,000 barrels (since a billion cubic feet of gas is equal to 0.167 million barrels of oil equivalent). Therefore, the total new projected amount of gas coming from Jafurah by 2030 is about 334,000 bpd — not even enough to cover the current amount of crude oil being burned for power generation, let alone any increase in demand between now and 2030.
By Simon Watkins for Oilprice.com
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