A number of significant sour gas projects are in the works across the GCC, while the Shah gas field has just come online. How is the sector faring in uncertain times?
These are without question uncertain times for the oil and gas industry, with the headlines dominated by the falling oil price, project postponements and budget cuts. But there are certain sectors where the effect is not as acute as others – sour gas being one of them.
“It is an area of the oil and gas industry that has proved resilient, having come through previous periods of turbulence and avoiding any discernible downturn as a result of the rapid emergence of shale gas projects – a trend that some thought could affect the perceived viability of often costly sour gas projects.
“Intuitively it would seem that sour gas projects don’t make sense in such a climate, but recent history has shown that these types of projects are still viable in the Middle East and other regions where energy consumption is increasing,” said Angie Slavens, managing director at UniverSUL Consulting.
“It stands to reason that if a consistently low natural gas price hasn’t impacted these types of projects, then a relatively short-term dip in oil price will not have a significant impact either.
Of course, many of the natural gas projects in the Middle East are heavily subsidised by oil revenues, so low oil prices for a significantly long period of time could eventually impact the feasibility of such developments; however, the duration required to create such an outcome is highly unlikely.”
The ambition of the wealthier GCC states to develop their own reserves to support national demand is also helping drive sour gas projects, Slavens adds: “In the GCC, many countries want to develop their own national programmes and create their own sources of supply, rather than relying on imports. For the most part, the recent industry climate has been such that if a developed country has its own natural resources they are likely to exploit them, no matter how difficult development and production might be.
“Ironically, this is precisely the trend that has produced the gluts and corresponding low prices we are currently seeing, as countries like the US have produced at supply rates that outpace local demand.
The current situation appears to be forcing somewhat of a rebalancing of global supply and demand that is difficult, if not impossible, to accurately predict, but one thing is clear; the future demand for energy and therefore natural gas production in the GCC is a reality, which is why sour gas projects in this region are not likely to be impacted by low oil prices.”
In fact, the downturn that has rocked the oil industry could actually prove to be a positive for sour gas projects in the GCC, according to Hisham Sadaawi, a consultant in the UAE. “It’s a hazardous business trying to predict oil prices and nobody knows how long the downturn will last, whether it’s a year or three years,” he told Oil & Gas Middle East.
“However, most would agree that prices will rise again. My guess is that with the current downturn in activities, there will be an improvement in the availability of drilling rigs, contractors and vendors. The price of raw materials could also fall, particularly the types of materials that are used in sour gas development. The fall in oil prices could be an opportunity to implement projects in sour gas fields and a lower cost than when the price of oil is high.”
The push to produce more gas in the Middle East has been driven by the ever increasing demand for energy – a trend that will likely continue should the population of GCC countries such as United Arab Emirates, Qatar and Saudi Arabia rise further.
As a result, there are a number of large-scale sour gas projects underway across the region. Of particular note is the Shah gas field in Abu Dhabi, which produced first gas in last month. The field will produce 1 billion cubic feet a day of sour gas into 500 million cubic feet of gas after stripping it from sulphur.
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“The ultra-sour gas projects have had a tremendous investment poured into them,” said Justin Slagle, consulting engineer at Bryan Research & Engineering. “The Shah field is obviously the most prominent of those projects; it is very important that this project is a success.”
“I expect it to be a proving ground for future projects; they have introduced a hydrotreater into the gas plant, which is unique. The field has almost as much acid gas as it does methane, and it is clear the Shah field will shape decisions in future projects.”
On the Shah gas plant, Slavens adds: “When the project commenced five years ago, the world was impressed with its size as one of the largest developments in the world, in terms of raw gas and sulphur production.
One might think that with such a large facility starting up in 2015 there might be a pause before development of another major sour gas project in the country, but that has not proven to be the case, as the Bab gas development project commenced development prior to the start-up of Shah. Bab will be similar in raw gas production to Shah but will produce more sulphur due to higher H2S content.”
The complex nature of sour gas extraction and production means that finding the necessary talent can be a struggle – a familiar problem in the oil and gas industry. However, there are signs that an increasing number of people and companies are looking to work in the sector.
“Expertise is the main issue faced by developers and operators when it comes to sour gas,” said Slagle. “However, there is a thirst for knowledge in the GCC; just to illustrate the point, BR&E (Bryan Research & Engineering) has trained over 500 engineers in the Middle East over the past few years.
“In January, we trained 80 engineers to design, operate, optimise and troubleshoot sour processes in the Middle East. Sour gas requires engineers to learn new procedures, new processes and use new tools. This is just part of bridging the knowledge gap, but shows a trend towards a lasting solution. I’m optimistic this challenge will be overcome because there seems to be a real desire to address it in every company I visit.”
Slavens tells Oil & Gas Middle East that in her almost two decades working on sour gas projects, she has witnessed a marked increase in companies looking to work in the sector.
“I would say that the sour gas industry faces similar human resource constraints as the rest of the oil and gas industry, but perhaps a little more severe because it is a specialised area of expertise; however, there are an increasing number of contractors showing interest in developing sour gas processing and sulphur recovery capabilities.
“Looking back to the time when I started my career, nearly 20 years ago, there were only about five or six major sulphur technology players, but now most of the major engineering companies are seeking to develop some kind of sulphur capability due to its importance, as the industry has been turning toward increasingly sour conventional reserves.”
Surmising the challenge of recruitment, Sadaawi believes that the downturn in the oil market could benefit sour gas projects.
“Dealing with sour gas requires more experienced people, compared with conventional projects. That’s true across the board, whether it’s a consultant or a construction contractor, for example. So there is a chance that during an industry wide downturn, more experienced professionals will end up working on sour gas projects, as I expect that these will continue.
“If a contractor is bidding on a sour gas development, they might find that the risk involved is more than on a conventional project, so when the market has high demand, they can pick and choose. But now we have a situation where contractors might not have such a wide choice, and have to bid on what is actually available.”
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Sour gas projects:
Fadhili Gas Processing Plant
Client: Saudi Aramco
Consultant: Foster Wheeler Arabia
EPC contractor: Not appointed
Budget: $5bn
Status: FEED
Bab sour gas processing plant
Client: Abu Dhabi Industries Company/ADNOC/Shell
Stage: Not appointed
Value: $10bn
Scope of work: The project calls for the development of the sour gas processing plant with a production capacity of 1.3bn cubic feet per day
Status: Planned
Completion date: 2020
Shah gas field
Client: ADNOC, Oxy
Stage: Operational as of January 2015
Value: $11.3bn
Scope of work: When the field is fully operational, it will produce around one billion cubic feet per day. The field is one of the most important fields in the GCC and will contribute towards ADNOC’s plan to boost production to six billion cubic feet per day.
Shah-Habshan-Ruwais Railway, United Arab Emirates
Client: Etihad Rail
Stage: EPC bid
Value: $11bn
Scope of work: The Shah-Habshan-Ruwais Railway Project is a 264km-long rail-line that will begin at the Shah gas fields in the south of UAE to connect with the gas distribution and processing facilities at the port of Ruwais in the north. The rail line will be initially used to transport freight and later passenger services.
Completion date: 2018
Khurais expansion
Client: Saudi Aramco
Consultant: Foster Wheeler Arabia
EPC contractor: Saipem Limited
Budget: 20bn
Status: Execution
