TotalEnergies and Sinopec eye $10 billion deal to invest in massive Aramco gas project, reports say



China’s Sinopec and French supermajor TotalEnergies are among the key companies holding talks with Saudi Aramco for potential investments in the Saudi Arabian oil giant’s massive Jafurah unconventional gas development.

The Jafurah site is thought to be the largest known free gas field in the kingdom and a key component of Aramco’s strategy to ramp up unconventional gas output, in line with its energy transition plans.

The two companies are said to be separately involved in discussions with the Saudi state giant about participating in the Jafurah gas development, Bloomberg News reported on Tuesday, citing anonymous sources, followed by a Reuters report that also quoted an unnamed source.

Saudi Aramco is carrying out a phased development approach for its $100 billion-plus Jafurah project, which is expected to produce up to 2 billion cubic feet per day of gas by 2030.

The ongoing talks between Aramco and the two companies could also include plans about a potential liquefied natural gas (LNG) facility to export the fuel, Bloomberg reported.

TotalEnergies and Saudi Aramco did not immediately respond to Upstream queries on Tuesday, while an Upstream phone call to Sinopec in Beijing went unanswered, outside of the Chinese business day.

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Mohammad Al Shammary, Saudi Aramco’s senior vice president of procurement and supply chain management, declined to comment on the reports when approached Tuesday by Upstream at the Offshore Technology Conference in Houston.

Strategic project

Aramco aims to attract investors for the Jafurah project as it involves several billion dollars’ worth of investments in the coming years.

Aramco’s plans for Jafurah form part of the country’s long-term strategy aimed at boosting gas production to free up almost 1 million barrels per day of oil from domestic use, increasing export capacity.

The company, while confirming a phased development approach for the gas project last year, said the scheme’s first development phase is likely to come onstream by 2025, while Jafurah 2 is expected to be in place by 2027.

Aramco earlier noted that it is progressing with the phased development of the Jafurah gas plant, which will reach a raw gas processing capacity of 3.1 Bcfd.

The full field development of Jafurah is expected to reach a production capacity of 2 Bcfd by 2030, lifting the company’s overall gas production capacity by 50% in the same timeframe.

The huge Jafurah project “will provide feedstock for hydrogen and ammonia production and will help meet expected growing local energy demand”, Aramco said last year.

Second development phase

Leading international contracting giants are competing for the second development phase of Saudi Aramco’s Jafurah unconventional onshore gas project, with key packages worth upwards of $6 billion, Upstream reported earlier this year.

While key EPC packages for Jafurah phase one were awarded in 2021, Aramco is likely to award contracts for the project’s second development phase later this year, Upstream understands.

Some of the international contractors that are likely to compete for Jafurah 2 packages include India’s Larsen & Toubro (L&T), South Korea’s Samsung Engineering, Daelim Industrial, Hyundai Engineering and Hyundai E&C, Italy’s Saipem, Japan’s JGC and Spain’s Tecnicas Reunidas.

The first contractual package includes a gas treatment facility comprising two trains, each with a gas handling capacity of 1.057 Bcfd.

The second involves utilities and off-site facilities, which include a sulphur recovery unit (SRU), tail gas treatment unit (TGTU) and an export facility, sources said.

A third package involves work on Jafurah’s gas compression facilities, with up to 600 million cubic feet per day of combined capacity.

In addition, two onshore pipeline packages are also said to be on offer, together comprising the upstream and downstream pipeline facilities. More than 830 kilometres of pipelines have been included in the two packages.

Two separate packages for Riyas Natural Gas Liquids facility are also a part of Jafurah’s further expansion programme and have been offered to engineering, procurement and construction players.

Gas expansion plans

Saudi Arabia’s dry natural gas production exceeded 4 trillion cubic feet for the first time in 2020.

Aramco commissioned the Fadhili natural gas processing plant in 2019 and began processing natural gas from non-associated fields in the eastern region, scaling up gas-based infrastructure in the country.

Most of the incremental gas production in the country is likely to come from the Jafurah development, which is also the largest non-associated gas field in Saudi Arabia, with more than 200 Tcf in reserves.

In November 2021, Aramco awarded multiple contracts for Jafurah, describing the awards of 16 subsurface and EPC contracts valued at $10 billion for the Jafurah gas plant and gas compression facilities, as well as infrastructure and related surface facilities.

The company has announced an ambition to achieve net-zero greenhouse gas emissions on a Scope 1 and 2 basis across its wholly owned operating assets by 2050.

Aramco has said its capital expenditure at Jafurah is expected to total $68 billion over the first 10 years of development.

However, the company expects more than $100 billion in total overall life-cycle investment at Jafurah.

With an estimated 200 Tcf of gas in place, the Jafurah basin also hosts the largest liquids-rich shale gas play in the Middle East, Aramco earlier noted.

Hydrogen potential

Saudi Arabia Energy Minister Abdulaziz bin Salman al Saud has also highlighted the country’s plans to tap into its Jafurah gas reserves to produce hydrogen.

Crown Prince Mohammaed bin Salman in 2020 said, “The development of the field would earn, within 22 years from the beginning of its development, a net income for the government of about $8.6 billion and provide gross domestic product with an estimated $20 billion annually”.

The Jafurah field covers a length of 170 kilometres and a width of 100 kilometres between Ghawar — the world’s largest conventional onshore oilfield — and the Saudi coast.

(Upstream’s Iain Esau and Gareth Chetwynd contributed to this article.)