Saudi Aramco plans to produce 200 million cubic feet per day (cfd) of unconventional natural gas by 2018 to supply a new phosphate project and a power plant, an industry source said.

Opec member Saudi Arabia aims to develop shale gas for power generation in order to save more of its crude oil for export.

Aramco is keen to increase gas output as it can fetch $100 per barrel by exporting crude oil versus around $4 if it sells it to a Saudi power plant.

CEO Khalid al-Falih said last year the company was ready to commit gas for the development of a 1,000 megawatt power plant which will feed a phosphate mining project that Saudi Arabian Mining Co (Maaden) is developing for the Waad al Shamal Mining City.

"40 million cfd will go to the phosphate project of Waad al Shamal while 160 million cfd will go to Saudi Electricity Co for a power plant," the industry source said.

Oil minister Ali al-Naimi has said Saudi Arabia has estimated unconventional gas reserves of more than 600 trillion cubic feet, more than double its proven conventional reserves.

That would put Saudi Arabia fifth in a 32-country shale gas reserves ranking compiled for the U.S. Energy Information Administration.

Saudi Aramco is exploring and has made appraisals in the northwest area, the Eastern Province and in the Empty Quarter. It is drilling in the south of Ghawar, the northwest and Jafurah which lies between Al Ahsa and Qatar.

One obstacle is finding water needed to release natural gas from rock, shale or compacted sand formations.

Saudi Arabia aims to use either sea water or liquefied petroleum gas, the latter a technique being developed by North American companies.

"Water is always an issue, it is an issue in North America when they have much more water than we have here in this region," Amin al-Nasser senior vice president of upstream at Aramco said at an industry conference in Manama on Sunday.

"We are looking at using sea water, we are working with lots of companies. Schlumberger is one of them in terms of using water fracking. We are confident that technology will be developed and if we have to use water as I said we are looking at using sea water," said Nasser.

"The focus area for us is unconventional gas....the cost of unconventional is as you know on the high side and so the question is how do we do it economically," he told the conference. – Reuters