The Shale Project That Can't Deliver What Saudi Arabia Promises

Saudi Arabia’s sudden enthusiasm for developing its vast shale resources — led by the giant Jafurah basin — is rooted in a hard?nosed mix of energy security, export optimisation, and geopolitical positioning. Riyadh wants to slash the crude it still burns for power, free up more barrels for export at a time of tight OPEC+ management, and secure new feedstock for its expanding petrochemicals and industrial base. At the same time, the Kingdom is acutely aware that the U.S. shale boom reshaped global energy markets and eroded OPEC’s pricing power, and it is determined not to be left behind in the next phase of unconventional development. With Jafurah holding one of the world’s largest unconventional gas endowments, Saudi Arabia is presenting the field as the cornerstone of a new era of domestic supply growth and future export potential, with a recent announcement that it will export its first condensate from Jafurah gas plant in February. That said, there is often a vast difference between Saudi Arabia’s projections of key numbers, including oil reserves and production, and the reality, and a thorough analysis of the Jafurah project reveals deep shortcomings in is projections here too.  

With around 229 trillion standard cubic feet (Tscf) of natural gas and 75 billion barrels of condensate, the US$100 ?billion Jafurah project is expected to produce 200 million standard cubic feet per day (Mscfd) of gas in Phase 1, with the figure set to rise to 2 billion standard cubic feet per day (Bscfd) by 2030. The projected numbers would mark around a 60% increase in Aramco’s gas output capacity, while the company’s ultimate goal is to boost its gas output by 80% by 2030. In large part, this will go to meeting domestic power demand, which is increasing by around 3-4% annually, with projections that it could reach at least 2.5 times today’s level by 2050. It may well be higher, in line with forecasts that artificial intelligence, cloud, and heatwave-driven power needs will drive 40-50% of incremental global gas demand to end-2040 at a minimum. Moreover, according to industry projections, by that point data centre-related demand could add 150–200 billion cubic metres a year globally, a 3.6-4.9% increase over current global gas demand projections. Saudi Arabia intends to position itself as a key Middle Eastern player in this high?growth, geopolitically critical segment. Overall, Aramco has said its unconventional ?gas programme at peak production is expected to generate electricity equivalent to displacing ‌500,000 barrels per day (bpd) of oil. Another positive for Saudi Arabia in this equation is that because Jafurah is primarily a gas project, it should not be counted in Saudi Arabia’s OPEC output quota.

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This all looks great on paper, as do all of Saudi Arabia’s key forecasts related to its oil and gas sector. But, as ever, the reality is somewhat different. The overriding reason for this is Saudi Arabia’s influence in the world rests almost entirely on its oil and gas reserves and associated production numbers — the larger these appear, the greater its geopolitical weight. Consequently, it has never been more in any country’s interest to talk up anything than it is in Saudi Arabia’s to overinflate these key figures, as analysed in full in my latest book on the new global oil market order. For example and starting from the very beginning, 1989 saw Saudi Arabia claim proven oil reserves of 170 billion barrels. But only a year later — without the discovery of any major new oil fields or major verified reappraisals of reserves at existing fields — the official estimate somehow grew by 51.2%, to 257 billion barrels. Shortly after that, and again without any major new discoveries, Saudi Arabia’s proven reserves increased to just over 266 billion barrels, and they rose once more in 2017 to 268.5 billion barrels. Over the period in which these increases were announced, the country was extracting an average of 8.162 million bpd. Therefore, from 1990 (the year in which Saudi Arabia’s claimed proven oil reserves jumped from 170 billion barrels to 257 billion barrels), to 2017 (the year when Saudi Arabia was claiming proven oil reserves of 268.5 billion barrels), the Kingdom had physically removed from the ground forever an average of just over 2.979 billion barrels of crude oil every year. The total amount of crude oil permanently removed from the beginning of 1990 to the beginning of 2017 was, therefore, 80.43 billion barrels. In short, from 1990 to 2017, Saudi Arabia’s official crude oil reserves number had gone up 98.5 billion barrels, despite there being no new oil finds and it physically removing 80.43 billion barrels forever. 

Equally questionable are the Kingdom’s stated production numbers and, by extension, its claims about spare capacity. A representative case in point came after the 14 September 2019 attacks on the Abqaiq and Khurais facilities, when Energy Minister Prince Abdulaziz bin Salman stated that “the Kingdom plans to restore its production capacity to 11 million bpd by the end of September and recover its full capacity of 12 million bpd two months later.” Neither figure was remotely accurate. In reality, Saudi Arabia averaged crude oil production of just 8.151 million barrels per day (bpd) from 1973 to 14 September 2019. It had never produced anywhere near 12 million bpd at that point and had only briefly averaged 11 million bpd once — in November 2018, at 11.093 million bpd.. Little has changed since then. Average Saudi Arabian crude oil production from 1973 to the close of business yesterday was 8,297,440 bpd. As an adjunct to this, despite its often-repeated comments about a maximum sustainable crude oil capacity of 12 million bpd, again, it has achieved this figure only once (in April 2020) and it was unable to sustain it. Crucially as well is that the Energy Information Administration (EIA) defines spare capacity as “the volume of production that can be brought on within 30 days and sustained for at least 90 days”. After the 14 September 2019 attacks, it became clear that Saudi Arabia had quietly redefined “spare capacity” to include not only what met the EIA definition but also crude held in storage, crude it could buy from elsewhere, and crude it could withhold from contracts and redirect into storage.

This pattern of strategic grandiosity appears to be at play in its Jafurah numbers as well — unsurprisingly, as it is a key part of the Kingdom’s flagship shale energy drive, and thus subject to the same motivation as its other two key sectors. In early 2024, an additional 15 Tscf of gas deposits was suddenly declared proven, bringing the official total to 229 Tscf. Even assuming this is accurate, the question remains: is it enough to reduce crude burn to the levels forecast by the Saudis and simultaneously allow the Kingdom to become a significant gas exporter by 2030? EIA data shows the country burned well over 500,000 bpd of crude oil in the second half of 2024 and industry estimates suggest it burned about 470,000 bpd in 2025. Two billion standard cubic feet per day of gas — Jafurah’s targeted production by 2030 — equals 0.3340 million barrels of oil equivalent, or 334,000 barrels (as one billion cubic feet of gas equals 0.167 million barrels of oil equivalent). Therefore, the total projected new amount of gas to come from Jafurah by 2030 is around 334,000 bpd — not even enough to cover the current amount of crude being burned for power generation, let alone any increase in demand between now and 2030.

By Simon Watkins for Oilprice.com

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