The China Petroleum and Chemical Corporation (Sinopec) announced Thursday that its Sinopec Oilfield Service Company has signed an agreement worth about $1.1 billion to construct natural gas pipelines for Saudi Aramco, the state oil company of Saudi Arabia.
The Sinopec subsidiary is stepping into the third phase of a massive Saudi Aramco project to develop a natural gas pipeline network. Aramco canceled plans last year to increase oil production. Instead, it plans to increase natural gas production by 60 percent by the end of this decade — an ambitious goal that will require a vast network for moving the gas within Saudi Arabia, and perhaps for exporting it.
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Liquid natural gas (LNG) is seen as a growth market during the global “transition” away from oil, although many climate change activists do not like LNG much more than petroleum. The Biden administration is as keen to choke off natural gas as it is to cripple every other part of the American energy industry, creating huge opportunities for foreign producers.
Aramco began making international LNG acquisitions late last year, with an eye toward winning over Russia’s former customers in Europe. The Saudis made a series of major natural gas discoveries on their own territory over the past year, including a titanic gas reserve at the Jafurah Field, which might be the largest shale gas reserve in the Middle East.
Prince Abdulaziz bin Salman, Saudi Arabia’s energy minister, left, and Amin Nasser, chief executive officer of Saudi Aramco, during the 24th World Petroleum Congress in Calgary, Alberta, Canada, on Monday, Sept. 18, 2023. (Gavin John/Bloomberg via Getty Images)
Aramco bills Jafurah as “the jewel of our unconventional gas program” and “one of the most ambitious projects in Aramco’s history.” The gas is trapped deep underground beneath a layer of tough shale and liquid condensates, so Aramco has to use advanced fracking techniques to access the gas and pull it through dense rock formations.
The Jafurah discovery was big enough to make Aramco a major global LNG player all by itself. Combined with other discoveries, Saudi analysts believe they could become the third-largest gas producer in the world by 2030 — just in time to ride a projected surge of demand for gas over the following decade.
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Sinopec immediately expressed interest in working with the Saudis on the Jafurah Field, as did South Korea’s Hyundai, which signed a $2.4 billion contract to build a gas processing plant at Jafurah. Sinopec and Spain’s Tecnicas Reunidas also picked up contracts to build gas processing facilities.
Aramco’s “Master Gas System” will include almost 2,500 miles of pipeline when completed. Sinopec’s contract stipulates that it will complete its part of the construction by May 2027.
