Shale Gas Boom Lures Sabic

Shale gas is fast becoming a popular energy resource, and one of the leading manufacturers of petroleum-based products is seeking to invest in oil and gas firms that have proven cutting-edge technology in producing these commodities out of shale gas.

Saudi Basic Industries Corporation (SABIC) recognizes that the shale gas industry will soon flourish; that is why it is eyeing companies from the U.S. as well as other regions for possible shale gas and oil investments.

During an interview, Sabic’s CEO, Mohamed Al-Mady, mentioned that shale will soon become a popular global energy resource. As a result, Sabic wants to seize the opportunity to join and compete in the shale boom.  He added that the company plans to concentrate in the study of shale gas initially, and then move on to scouting for highly viable areas for investing in oil and gas.

Across the United States, shale gas drilling and production activities have increased tremendously. This growth helped push down local natural gas prices.  U.S. producers benefit as they are able to use reasonably-priced raw materials to manufacture petroleum-based products.

With these developments, huge petrochemical manufacturers in Saudi Arabia are all the more constrained to take a closer look into their feedstock and also compare costs. Right now, these manufacturers obtain gas at $0.75 for every Mn Btu, with the Saudi government backing them up in the form of subsidies.

Natural gas for December delivery was priced at approximately $3.50 per Mn Btu as of 10:00 a.m. on the NYMEX.

Saudi Arabia has been trying to raise its volume of gas produced each year so it can continuously supply the raw material requirements of local petrochemical manufacturers.  It also aims to provide for the growing energy requirements of domestic consumers.

Saudi Aramco is presently exploring the shale gas potential of its regions in the north. It is also planning to purchase interests in various firms with expertise in developing shale gas.

Al-Mady added that, while construction of U.S. shale plants are in full swing, the petroleum sector is expected to benefit from this surge within the next 3 years, at most.  He said that we are in an era where economies of many countries are developing or improving further, so it is anticipated that there’s going to be a big market for shale-gas based petrochemicals as well.

Ernesto Occhiello, one of Sabic Venture’s EVP disclosed that they are searching for gas and oil investment opportunities in countries like China, Europe, and the United States. Even buying shares from start-up petrochemical manufacturing ventures is one option.

Though a relatively new firm, Sabic Venture is already into discussions with groups that have brought in about 40 potential contracts, some involving production of gas out of shale. It is widely believed that technology-wise, the company will be one of the leaders in the use of shale gas.