DUBAI, July 7 Royal Dutch Shell is
ending investments in a gas development project in Saudi Arabia,
complicating the top oil exporter's efforts to exploit its huge
The search for gas has been a priority for Saudi Arabia as
it struggles to keep pace with rapidly rising domestic demand.
But the emergence of the shale gas industry has opened up
more lucrative opportunities for energy companies elsewhere.
"Shell has decided to end further investment in the Kidan
development," it said in an emailed statement.
"This was a difficult decision but Shell remains committed
to the Kingdom and we are keen to grow our investments, both in
upstream and downstream."
Shell did not give a reason for the decision to shelve the
joint venture in the Kidan area of the Empty Quarter, the sea of
sand dunes that cover south-east Saudi Arabia.
Last year, industry sources said the company was set to end
investments in the venture due to disagreements with the
government over terms.
At least three foreign firms - Italy's ENI, Spain's
Repsol and France's Total - have already
abandoned the search for commercially viable gas deposits in
that part of Saudi Arabia.
Shell has stuck it out longer in its South Rub al-Khali Co
(SRAK) project with state-run Saudi Aramco after finding small
quantities of gas.
Kidan is rich in sour gas and is near the 750,000 barrels
per day (bpd) Shaybah oilfield, one of the biggest in the
country. Sour gas has high levels of potentially deadly hydrogen
sulphide and therefore is tougher to produce than conventional
The relatively high cost of developing challenging deposits
in a country where gas sales prices are fixed at a fraction of
probable production costs were possible reasons to discourage
Shell too, industry sources familiar with the matter told
Reuters last year.
Saudi Arabia, which holds the world's fifth largest proven
reserves of gas, expects domestic demand for natural gas - which
it uses mainly for power generation - to almost double by 2030
from 2011 levels of 3.5 trillion cubic feet per year.
Saudi Oil Minister Ali al-Naimi had estimated the country's
unconventional gas reserves - those held in reservoirs that have
not been traditionally exploited - as at over 600 trillion cubic
feet, more than double its proven conventional reserves.
Saudi wants natural gas to help it cover demand for
subsidised domestic power so it can save its oil for more
(Reporting by Rania El Gamal; editing by Sami Aboudi and John