Well, it looks like Saudi 'ShaleEra' is powering up. Can't wait for LWP to tap into it further down the road!
But first, based on my research, I expect to see some action coming out of the US and/or India as early as next quarter. Keep your eye on the prize, guys and gals - proppants are LWP's primary business opportunity and we are fast approaching the pointy end of the commercialisation process.
In LWPs words, here is another reminder of what we have:
"Our technology allows manufacture of proppants from fly ash, which is an industrial waste by-product of coal-fired electrical power plants. Proppants made from fly ash are about 40 per cent stronger than kaolin clay and 40% lighter than bauxite by about the same proportion, both of which qualities make it cheaper.
Proppants are often the single largest cost item in the fracking process and represent a $53 billion global market. The market is forecast to grow at a compound annual rate of 13.7 per cent by 2022, according to Marketresearchstore.
There are actually two markets for proppants, one for use in shallow wells in which cost is the major concern[we are in this market NOW], and another for higher-cost deeper wells in which high compressive strength and the ability to withstand with down-hole temperatures are the main criterion.
From fly ash, we can make both a high-strength product [our HSP] and a low-cost product [our LSP] to address the two markets.
Our announcement in June covered the results of tests undertaken by independent US expert testing lab GEL on our proppants using Australian fly ash.
These results continue to validateLWP’s technology andthe competitive cost advantages of our fly-ash based proppants and their superiority over mined frac sand on a range of criteria, including compressive strength and roundness (proppants look very similar to tiny ball-bearings but need to be light weight).
We’ve also been testing other materials combined with fly ash to evaluate the effect on compressive strength and weight. Our R&D team has reported impressive internal test results that indicate to us that we could manufacture a low-cost ceramic proppant at about half the cost of producing our higher-strength ceramic proppants."
So... in view of our adaptable proppant technology, do I care much about where the oil price is at the moment?
Answer: No! We are currently in the first of the two proppant markets described above (i.e. for use in shallow wells in which cost is the major concern) and results continue to validate that our superior proppant technology can address it from both a cost and performance perspective, leaving frac sand it the very dust it creates (cough...).
Conclusion: Buckle up! One licence or 12+ month off-take agreement for our LSP and we're away. Before then, I hope to see another market update including further LSP results and status of discussions/negotiations.
That's it. Reminder complete. Here's the "Saudi ShaleEra" article. Enjoy and please DYOR. The above is all IMO.
Mark Thomas, Hart Energy
Wednesday, June 22, 2016 - 1:00pm
Former Saudi Aramco chairman and the new Saudi Arabian energy minister, Khalid al-Falih, was at the opening of Aramco's research center in September 2014 in Houston. The company has been able to access world-leading U.S. upstream expertise to help it study the possibilities for the kingdom's unconventional resources. (Source: Saudi Aramco)
With its national oil company (NOC) Saudi Aramco strategically tasked with the long-term goal of stepping up its technological capabilities related to accessing unconventional gas in shale and tight sands, the relatively short-term travails of a depressed oil price are not denting the NOC’s ambitions.
Unconventional gas is still stated by Saudi Aramco as being the preferred fuel for power generation and water desalination due to its increased efficiency and cleaner burning qualities.
And with the decision recently by the kingdom’s rulers to install Aramco’s chairman Khalid al-Falih—who incidentally is a graduate from Texas A&M University with a degree in mechanical engineering—as its new energy minister, that strategy is unlikely to change. Al-Falih, who has been at Aramco for more than 30 years, went on record early last year during a conference in Riyadh saying the company already had invested $3 billion up to that point in developing unconventional gas resources and had earmarked an additional $7 billion for it.
Former Saudi Aramco chairman and the new Saudi Arabian energy minister, Khalid al-Falih, was at the opening of Aramco’s research center in September 2014 in Houston. The company has been able to access world-leading U.S. upstream expertise to help it study the possibilities for the kingdom’s own unconventional resources. (Source: Saudi Aramco)
600 Tcf Shale Gas Reserves
“Saudi Arabia will be the next frontier after the U.S., where shale and unconventionals will make a significant contribution to our energy mix, especially gas,” he said, according to Reuters. His predecessor as minister, Ali al-Naimi, also had gone on record last year stating that Saudi Arabia estimated it had about 16.9 Tcm (600 Tcf) of shale gas reserves, which would put it in fifth place in the world rankings for total unconventional reserves.
It’s been less than five years since Aramco launched its unconventional gas initiative, which among other things eventually saw it open in late 2014 its Aramco Research Center in Houston. Operated by Aramco Services Co., the facility’s objective was and remains to conduct unconventional upstream research in exploration, drilling, field development and project management. Its location means it has been able to access world-leading U.S. drilling and production expertise.
That know-how already is paying dividends. Over the last two years the company has in particular been focused on potential reserves in its frontier Northern Region, where it is committed to developing shale gas to feed a planned 1,000-MW power generation plant.
Exploration Program
An exploration program in the kingdom’s northwest, South Ghawar and Rub’ al-Khali (Empty Quarter) area has seen promising results emerge in parts, particularly from the Jafurah gas basin. Jafurah is located southeast of Ghawar, the world’s largest conventional oil field.
“Our exploration efforts have resulted in finding big volumes of shale gas in the Jafurah Basin, close to Al-Ahsa [a town in eastern Saudi Arabia]. They are highly promising quantities and economically feasible as they contain a high rate of liquids; activities to evaluate the reserves are ongoing,” Amin Nasser, Aramco’s CEO, said at an industry event in the kingdom in March, according to Reuters.
Part of Saudi Arabia’s increased focus on unconventional gas is because it wants to step up its ability to manufacture more specialty petrochemicals rather than lower value petrochemicals. The country is already one of the largest producers of petrochemicals in the world. But its continued plan to expand its downstream capabilities needs to be fed by a corresponding expansion of its upstream gas resources.
23 Bcf/d Gas Goal
Nasser said earlier this year that Aramco plans to almost double its total gas production to 651 MMcm/d (23 Bcf/d) within a decade. Up to 113 MMcm/d (4 Bcf/d) of that could come from unconventional gas sources.
The advances in the Jafurah shale gas play have given it increased confidence that it can deliver on this promise despite the challenges that it faces there. According to a technical paper given at the SPE Asia Pacific Unconventional Resources Conference late last year, sweet spot identification within the Jurassic Tuwaiq Mountain Formation in the Jafurah Basin “represents a major challenge as it requires a large number of wells drilled over a wide geographical area with high associated costs.”
Knowing that innovative drilling, completion and stimulation practices were required, a study was carried out to identify and maximize potential frack stages and placements. The initial results from vertical wells drilled in the basin have proved, according to the paper, that proppant can be successfully placed and indicated the presence of a potential gas-rich play within the same source rock.
“Subsequent horizontal wells were the first liquid-rich gas carbonate horizontal wells with ultralow shale permeability in Saudi Arabia. The first horizontal wells had excellent gas production with significant amounts of condensate. By further building on experience from the drilled and stimulated wells, the lessons learned provide a foundation for the completion of future unconventional gas wells in the Jafurah Basin,” it stated.
Contracts Awarded
This talk of “potential” resources is not just hot air, however. Real-world contracts already have been awarded for various pilot-stage projects.
In August 2015 Japan’s JGC Corp. was awarded a contract to build shale gas facilities, including processing facilities, wellheads and pipelines, at Turaif in northwest Saudi Arabia. Called “System A” and estimated to be worth nearly $200 million, the project will be located near a large mining project called Waad al-Shamal currently under development.
JGC will build the facilities for Saudi Aramco with capacity put at 1.8 MMcm/d (66 MMcf/d). Although not formally confirmed by Saudi Aramco, a separate press release by Maloney Metalcraft confirmed it had secured a $2 million contract from JGC Gulf International Co. to supply gas treatment packages.
Aramco is developing the infrastructure for processing shale gas from the Jalamid Field in the Al-Jouf and Northern Border Regions, according to Maloney’s press release. “The first phase of this project (System A) will involve gathering gas from the ST-53A area of these fields, routing it to an engineered surface facility location [and] then transporting it about 30 km [18.6 miles] via pipeline to a customer. The contract with JGC Gulf International, which is contracted by Saudi Aramco, covers the initial four gas treatment separation and filtration packages in System A.”
System B of the project was, it continued, due to be tendered as an engineering, procurement and construction contract in second-quarter 2016 and would require four times the number of packages as System A.
Austen Adams, managing director of the energy division of Maloney’s parent company Avingtrans, said in the release the contract was its first shale gas project and demonstrated “that new business opportunities are available for companies with the recognized experience and expertise necessary to design and build performance-critical components.”
The full project, including both systems, is projected to supply up to 5.6 MMcm/d (200 MMcf/d) of unconventional gas by 2018.
Early-stage Projects
These early-stage projects, along with Saudi Aramco’s continued push to overcome the many technological and environmental challenges that remain—not least of which is the need to find enough water in the middle of the Arabian desert to help it carry out the required levels of hydraulic fracturing—means that the pace of unconventional activity in the kingdom will be sustained, both in terms of R&D work and exploration and appraisal programs. That also will entail further work on both adopting and adapting techniques and know-how developed by shale producers in North America such as the factory approach to drilling.
Saudi Arabia’s consistent long-term strategic approach to oil and gas is clearly guiding its approach to shale. With domestic demand for gas in the kingdom set to almost double from its 2011 level of 99.1 Bcm/year (3.5 Tcf/year) by 2030 and with the costs of unconventional gas production likely to continue to fall, the country’s shale resources remain increasingly attractive.
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LWP Price at posting:
0.5¢ Sentiment: Buy Disclosure: Held
is powering up. Can't wait for LWP to tap into it further down the road!
