Saudi Arabia Plans to Increase Sales of Natural Gas by 27%

Saudi Arabia, holder of the world’s fourth-largest natural gas reserves, will boost gas sales by 27% to fuel power stations and industrial development in the kingdom, freeing up more oil for export.

The country may export gas for the first time once foreign companies have completed the exploration and development of three new concession areas, Saudi Oil Minister Ali Ibrahim Naimi said at the opening ceremony of a plant that will raise the gas sales capacity of the state-owned Saudi Arabian Oil Co., or Saudi Aramco, by 1.5 billion to about 7 billion cubic feet a day.

The Haradh gas plant, inaugurated by Saudi Crown Prince Abdullah, “is but one part of the kingdom’s integrated economic policy which is designed to optimize utilization of available natural resources to propel the national industrialization drive,” Naimi told the more than 1,000 people at the inauguration.

With a population of 22 million, Saudi Arabia is developing its gas reserves with the aim of producing electricity for new industries.

The economy must grow by 6% a year to keep unemployment at 15%, Saudi American Bank has said.

Saudi Arabia will have total gas processing capacity of 9 billion cubic feet a day.

The Haradh plant -- built by Japan’s JGC Corp., France’s Technip-Coflexip and General Dynamics Corp. of the U.S. -- is the kingdom’s second facility to process gas that is not produced alongside oil.

The project, part of a plan to provide power to spur close to $20 billion in investment over the next five years, was completed last year and is operating at close to 50% capacity, said Abdallah S. Jumah, chief executive of Saudi Aramco.

The plant is expected to reach full capacity next month, officials said.

“This expansion allows, among other things, for the allocation of gas to several major petrochemical projects and massive industrial complexes,” Jumah told reporters.

Gas supplies will come from fields near the plant, including Ghazal and Wudayhi.

The facility also can deliver 170,000 barrels of natural gas condensate a day to the Ras Tanura refinery.

Aramco, the world’s largest oil producer, is ready to boost the capacity of its Ras Tanura refinery by 50% with the supply of condensates from the Haradh gas plant, Jumah said.

The condensates, easier to refine than crude oil, “will be converted into high-quality petroleum products, which will help meet the local markets’ increasing demand for various fuel types such as diesel and gasoline,” Jumah said.

On Jan. 26 the Saudi Oil Ministry will start to open sealed bids submitted by foreign energy companies to develop the three concession areas, Naimi said. Norway’s Statoil has said it was interested in bidding.

The gas concessions, only the second time in more than 20 years that foreign companies have been permitted to develop the country’s hydrocarbon resources, will cover a combined area of about 46,000 square miles.

Royal Dutch/Shell Group and Total, the first Western companies to win rights to develop the kingdom’s energy reserves, and Saudi Aramco agreed last year to find and produce natural gas in Saudi Arabia in a deal valued at $2 billion.

Sunday’s opening ceremony was in a tent in the desert close to the Haradh plant about 190 miles south of Dhahran, where Aramco has its headquarters. All senior Aramco and oil ministry officials attended, as did representatives from Shell, Europe’s second-largest oil company by market value, and Total, the Continent’s third-largest.

Saudi Arabia produces more than 8 million barrels a day of oil, of which it uses about one-sixth locally to fuel power and water desalination plants and other industries.