And it continues to be "empty"
Total Withdraws From Rub al-Khali (Empty Quarter) JV w/Shell & ARAMCO
Total Exits Saudi Venture After Failing to Find Gas (Update3)
By Ayesha Daya
Feb. 7 (Bloomberg) -- Total SA withdrew from Saudi Arabia's South Rub al-Khali, or SRAK, joint venture with Royal Dutch Shell Plc and Saudi Aramco because it failed to find gas.
``SRAK had completed three wells which resulted dry,'' Total spokeswoman Patricia Marie said today in an e-mail. ``Total then assessed the remaining economical potential of the acreage and decided to withdraw from the venture.''
France's Total and Shell, Europe's largest oil company, became the first Western companies to win rights to develop Saudi Arabia's energy reserves after they were nationalized in the 1970s. Western producers are investing in the country's gas and refining industries in a bid to gain future access to its oil reserves, currently developed by Aramco.
``When gas exploration opportunities emerged in 2001 there was genuine excitement about getting access to the Saudi upstream sector,'' Ross Cassidy, an analyst at Wood McKenzie Consultants Plc, said today by telephone from Edinburgh. ``But the contract terms make it difficult for companies to make money, and of the seven wells drilled by four consortia, none have found any commercial quantities of gas.''
Saudi Arabia has fixed the price at which it sells gas to local industries at 75 cents a million British thermal units, lower than the market rate. The companies would need to find liquid-rich gas to make the SRAK venture economically viable because the liquids would provide additional income, Cassidy said.
Shell `Committed'
Shell said today it remained ``committed'' to the project. It leads the venture to explore for gas in Saudi Arabia's Rub al- Khali, or Empty Quarter, with a 40 percent stake. Total held 30 percent.
``We don't believe that three wells are sufficient to test the potential of acreage this size and we remain cautiously optimistic'' that gas will be found, Shell's spokesman Adam Newton said today by telephone from London.
``Shell has stakes in the downstream sector in Saudi Arabia, which makes them reluctant to walk away as Saudi is seen as a long-term strategic proposition,'' Cassidy said.
Shell's ventures with Aramco include a 305,000-barrel-a-day refinery and petrochemicals plants in the country.
Saudi Arabia holds a quarter of the world's known oil reserves and about 2.5 percent of its gas. The country is struggling to meet soaring domestic gas demand as it spends record oil revenue on developing new cities and industries to provide improved living standards and jobs.
Total Transfers Shares
Total, based in Paris, will transfer its shares in SRAK to the other partners, Marie said in the e-mail. ``The agreements had anticipated the possibility for the venture to stop after three dry wells or for each partner to assign its shares to the remaining partners,'' she said.
Newton declined to comment on how the project will be split between Shell and Aramco, or on whether a new partner will be invited to replace Total. SRAK Chairman Khalid al-Falih said he was unable to comment because he was out of the country, when contacted by telephone today. |
