Saudi Aramco awarded contracts worth $10 billion for its Jafurah gas field, marking the beginning of the development of its giant unconventional gas field.
The world's largest oil exporting company has awarded 16 subsurface and engineering, procurement and construction (EPC) contracts, it said on Monday.
The deals were awarded to domestic and international service companies and involve several projects on the Jafurah programme.
Unconventional resources refer to those that required advanced extraction methods.
The capital expenditure at Jafurah – the largest non-associated gas field in Saudi Arabia – is expected to reach $68bn over the first 10 years of development.
The government is committed to the empowerment of national companies such as Aramco and no other energy company in the world is empowered to the same extent
Prince Abdulaziz bin Salman Al Saud,
Saudi Arabia’s Energy Minister
The development of Jafurah will positively contribute to the kingdom’s energy mix and it has been made possible thanks to the close co-operation between more than 17 agencies, Prince Abdulaziz bin Salman Al Saud, Saudi Arabia’s Energy Minister, said.
“The government is committed to the empowerment of national companies such as Aramco, and no other energy company in the world is empowered to the same extent by the state, or by the Ministry of Energy which oversees the concession to develop the kingdom’s hydrocarbon resources,” Prince Abdulaziz said.
With an estimated 200 trillion standard cubic feet of gas in place, the Jafurah basin hosts the largest liquid-rich shale gas play in the Middle East.
This covers an area of 17,000 square kilometres. The production of natural gas at Jafurah is expected to increase to 2 billion standard cubic feet per day (scfd) of shale gas by 2030, from 200 million scfd in 2025, with 418 million scfd of ethane and around 630,000 barrels per day of gas liquids and condensates, which are feedstock for the petrochemical industry.
It will make Saudi Arabia, the Arab world’s largest economy, one of the world’s largest natural gas producers.
The project is a key component of Aramco’s long-term strategy and the company expects total overall life cycle investment at Jafurah to exceed $100bn.
Aramco expects to create more than 200,000 direct and indirect jobs through its unconventional gas programme at the Jafurah, North Arabia and South Ghawar fields.
This is a pivotal moment in the commercialisation of Saudi Arabia’s vast unconventional resources programme, Amin Nasser, chief executive and president of Aramco, said.
“It is a breakthrough that few outside the kingdom thought was possible and which has positive implications for energy security, economic development and climate protection.
“Gas has a critical role to play in the energy transition and it will help to significantly reduce emissions in the domestic energy sector, while providing a feedstock for low-carbon hydrogen and ammonia,” Mr Nasser said.
Jafurah is expected to contribute to Saudi Arabia’s goal of producing half of its electricity from gas and half from renewables as the kingdom pursues its 2060 net-zero target.
At peak production, Aramco’s unconventional gas programme is expected to replace around half a million barrels of crude oil a day that would otherwise have been used for domestic consumption.
The Jafurah gas development alone is expected to replace more than 300,000 barrels of crude oil a day at peak production.
“The development of Jafurah is a game-changer for our unconventional resources programme. It will be one of the most modern, cost-efficient shale development schemes in the industry and observe the highest environmental and safety standards,” said Nasir K Al Naimi, Aramco’s upstream senior vice president.
Aramco, like other major oil producers, has benefited from higher crude prices. Last month, the oil exporting company said its third-quarter profit more than doubled on higher crude prices and improved refining margins.
Net profit in the three-month period to the end of September increased to $30.4bn, from $11.8bn in the same period a year ago, the company said in a regulatory filing to the Tadawul stock exchange, where its shares are traded.
It unveiled plans to target net-zero carbon emissions by 2050 after the kingdom said it aimed to neutralise its emissions by 2060.
Tips on buying property during a pandemic
Islay Robinson, group chief executive of mortgage broker Enness Global, offers his advice on buying property in today's market.
While many have been quick to call a market collapse, this simply isn’t what we’re seeing on the ground. Many pockets of the global property market, including London and the UAE, continue to be compelling locations to invest in real estate.
While an air of uncertainty remains, the outlook is far better than anyone could have predicted. However, it is still important to consider the wider threat posed by Covid-19 when buying bricks and mortar.
Anything with outside space, gardens and private entrances is a must and these property features will see your investment keep its value should the pandemic drag on. In contrast, flats and particularly high-rise developments are falling in popularity and investors should avoid them at all costs.
Attractive investment property can be hard to find amid strong demand and heightened buyer activity. When you do find one, be prepared to move hard and fast to secure it. If you have your finances in order, this shouldn’t be an issue.
Lenders continue to lend and rates remain at an all-time low, so utilise this. There is no point in tying up cash when you can keep this liquidity to maximise other opportunities.
Keep your head and, as always when investing, take the long-term view. External factors such as coronavirus or Brexit will present challenges in the short-term, but the long-term outlook remains strong.
Finally, keep an eye on your currency. Whenever currency fluctuations favour foreign buyers, you can bet that demand will increase, as they act to secure what is essentially a discounted property.
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UAE currency: the story behind the money in your pockets
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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