Saudi Aramco starts up Hasbah gas production

Saudi Aramco starts up Hasbah gas production

Saudi Aramco has started producing gas from the Hasbah offshore field, a project that will help to ease

Saudi Arabia’s tight gas supply before the peak summer demand period.

The project, which will add 39 million cubic metres per day to Saudi Arabia’s output, is the result of

Riyadh’s strategy to increase the amount of gas it produces from non-associated fields.

Hasbah was scheduled to start up last year, but technical difficulties caused delays.

“It’s a really technically difficult field,” Jim Krane, an energy analyst at Rice University’s Baker Institute,

told Natural Gas Daily. “It’s sour gas and also offshore, so it’s a big deal that Saudi Aramco has got this

online and operating.”

State-owned Aramco called the project “one of the most challenging non-associated gas field

developments” in its weekly magazine.

The gas from Hasbah has a sulphur content of 4-8%, which means it requires a lot of processing. This will

initially take place at a facility at Wasit before moving to the Fadhili facility when it comes online in


The additional costs associated with offshore production and sulphur processing make Hasbah’s gas

expensive – at around $3.50-5.50/MMBtu. Even after Saudi Arabia increased its domestic gas rates in

January, from $0.75/MMBtu to $1.25/MMBtu, the state is still subsidising the fuel for industrial

consumers. Projects such as Hasbah require greater subsidies than most.

It would be cheaper for Saudi Arabia to import gas from abroad and take advantage of low energy

prices, but this is not an option the country is willing to consider as it is focused on being self-sufficient

in terms of its gas needs.

“The lifting and processing costs with some of these sour gas fields are way above LNG prices these

days,” said Krane. “Temporarily, they could probably find some gas on the spot market that would cost

less, but the price fluctuates. It might be cheaper now but it could go up later.”

In any case, the country has not built the infrastructure to import or export gas. Riyadh considered

building an LNG terminal several years ago, but the idea was ruled out.

The plan to increase non-associated gas production is centred in the Gulf – where Hasbah is located –

and is intended to meet Saudi Arabia’s rising demand. Saudi Aramco produced gas from Karan, its first

major non-associated field, in 2013.

Arabiyah will be the next offshore non-associated field to start production. “The successful

commissioning of the Hasbah gas field which, along with Arabiyah, will feed non-associated gas to the

Wasit Gas Plant, marks a shift for Saudi Aramco to become a leader in offshore gas production,” the

company said in its magazine.

The projects may be an expensive way to source gas, but Aramco will need to continue to develop fields

like these to meet domestic demand. “Even though it’s not a good deal on paper right now – it’s not

competitive with prices elsewhere – for the Saudis it may still make sense,” said Krane.

The Saudi Arabian gas market’s isolation from international energy markets will make policymakers

weigh the cost of expensive gas projects against the opportunity costs of using oil as a substitute fuel.

Saudi Arabia has tried to minimise the use of oil to produce power and fuel its heavy industries for many

years. While the global drop in oil prices has somewhat reduced this need, it still makes more sense for

Saudi Arabia to allocate as much oil as possible for export.

“As long as it’s cheaper to burn that gas than it is to burn oil and forego exports on a barrel of oil, then it

makes sense for them,” said Krane.

The oil price drop highlights another benefit of developing non-associated gas fields.

If Saudi Arabia wants to increase or lower its oil production in response to international prices, doing so

would affect gas production from associated fields.

By producing gas from non-associated fields, Saudi Arabia has more flexibility to adjust its oil output

without causing a gas shortfall or glut in its domestic market.

“Non-associated gas is really valuable in that way,” said Krane. “It decouples you from the restrictions

and quotas that you may face on oil production […] If they did want to relax some of the oil production,

for example, the gas industries wouldn’t be hurt to the same extent. They’d still have non-associated gas

that they could supply.”

Share Button