Saudi Arabia plans $110 billion investment in Jafurah unconventional gas field

Saudi Aramco plans to invest $110 billion to develop unconventional gas reserves in Saudi Arabia’s Jafurah field, the state news agency SPA said. It said the development plans were reviewed by the Saudi High Commission for Hydrocarbons in a meeting chaired by Crown Prince Mohammed bin Salman.

The Jafurah deposits are estimated to hold 200 trillion cubic feet of wet gas and the phased development of the field is expected to gradually increase production to 2.2 trillion cubic feet by 2036 if fully completed, SPA said.

It said the field was expected to produce 130,000 barrels per day of ethane and 500,000 bpd of gas liquids and condensates.

Prince Mohammed said development of the field would over 22 years provide the government with an annual net income of $8.6 billion and contribute $20 billion to the kingdom’s gross domestic product per year, according to the agency.

Jafurah is southeast of Ghawar, the world’s largest conventional oilfield.

Aramco has identified huge gas resources in the country, the world’s top oil exporter, and is working to develop unconventional reserves in South Ghawar and Jafurah deposits in eastern Saudi Arabia, a Saudi official said previously.

Unconventional gas refers to reserves requiring advanced extraction methods, such as those used in the shale gas industry.

Saudi Arabia aims to become gas exporter by 2030.

SPA said Prince Mohammed had ordered gas produced from Jafurah to be prioritised for domestic industries, including mining, to support the kingdom’s Vision 2030 development plan.

Saudi Aramco hit the $2 trillion target sought by Saudi Crown Prince Mohammed Bin Salman in December 2019 as its shares racked up. Aramco’s initial public offering (IPO) is the centrepiece of the Saudi crown prince’s vision for diversifying the kingdom away from its oil dependence by using the $25.6 billion raised to develop other industries.

Saudi Aramco’s IPO was front page news in mainstream Saudi media, with headlines such as “Aramco at the top of the world” and “A dream come true”.

Some 15.9 billion riyals worth of Aramco shares were traded by the close, with around 417.7 million shares exchanging hands, Refinitiv data showed. This made up most of the total turnover of the whole Riyadh market which was 18.5 billion riyals.

“Initial price action has validated our thesis that Aramco discounted its IPO price to leave upside on the table and allow regional investors to benefit from the listing of its crown jewel,” Zachary Cefaratti, CEO of Dubai-based Dalma Capital, which invested in the IPO, said in a note on Thursday.

“The average institutional investor received less than 1/6th of the shares they bid for in the IPO, and have had to buy shares on the open market,” Cefaratti said of the Aramco deal, which became the world’s largest, topping the $25 billion 2014 listing of China’s Alibaba.

The successful completion of the IPO has also led to a strengthening of Aramco’s dollar bonds, which are now trading at yields closer to Saudi Arabia’s sovereign debt.

“It makes sense for Aramco to trade level with the sovereign, as Saudi Arabia’s economic is still so dependent on oil, but the goodwill from the IPO has certainly helped,” one banker who worked on the Aramco bond issue said.

Most of the early trading was small scale, of 1,000-1,500 shares, a trader in Riyadh, who asked not to be identified, said, adding this signalled that some retail investors were “happy with a 6 riyal per share gain”.

Aramco shares will also join the Tadawul index and global benchmarks such as MSCI and FTSE next week, which analysts said should fuel demand, particularly from “passive” investors.

Separately, World stocks hit a record high on Thursday, passing an all-time peak set in early 2018, on investor enthusiasm the United States and China were close to an initial deal to defuse a prolonged trade war. Shares moved sharply higher after US President Donald Trump said in a tweet that the two countries were “getting VERY close to a BIG DEAL.”

The MSCI all-country world index, which tracks shares in 49 countries, climbed to 551.84 points to surpass the previous record of 550.63 points set on Jan. 29, 2018.

The index has risen more than 20 per cent this year, helped as well by a lowering of interest rates and injections of government stimulus around the world.

Wall Street rallied shortly after the open on Thursday as President Donald Trump said Washington and Beijing were close to a “BIG DEAL” on trade.

Agencies