Aramco signs $175m deal to increase eastern gas fields production

Energy giant looks to displace oil with gas to meet power generation needs

Saudi Aramco will spend $414 billion over the next ten years in building infrastructure and drilling as it targets a doubling of its gas production capacity. Hamad I Mohammed / Reuters

Saudi Aramco has awarded a $175m contract award to Baker Hughes to support higher production from the eastern Haradh and Hawiya gas fields, as the world's largest oil producer moves to increase gas production to meet rising domestic needs.

The kingdom, the world's biggest oil exporter, has begun switching to gas from gasoline to fire its power stations, as it looks to raise usage of the cleaner fuel in its energy mix to 70 per cent in the medium to long term from 50 per cent now. The country hopes the move will free up more oil for export.

Baker Hughes will supply 27 gas compression trains to support extraction of gas from the two fields, which are part of Al Ghawar, the largest onshore oilfield in the world.

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Aramco awarded $4.5 billion worth of contracts last month to boost the kingdom's gas production, as it bids to double its gas production to 23 billion cf/d over the next decade.  At Hawiyah, Aramco plans to increase gas production by 1.3 billion cubic feet a day (cf/d) from its current capacity of 2.5 billion cf/d.

The national oil company's capacity for processing raw gas stood at an all-time high of 12 billion scfd of gas last year, with an output of 8.3 billion scfd of sales gas.

Earlier this week, the oil giant announced plans to raise its capital expenditure ceiling to $414 billion over the next decade as it looks to spend on infrastructure and drilling. Since the fall in oil prices, Aramco's strategy has also embraced refining and petrochemicals ventures as it looked to gain greater value for every barrel of oil. Last month, it announced plans with the Sabic - the world's fourth-largest chemicals company - to build a $20bn oil-to-chemicals plant on its eastern coast.

Aramco also signed an agreement on Thursday with Montreal-based engineering services company SNC Lavalin to accelerate localisation ventures in the country, as part of its In-Kingdom Total Value Add programme, which seeks to localise its oilfield services and equipment value chain.