Shell is pulling out of the Kidan sour gas development in Saudi Arabia after an exploration programme alongside state behemoth Saudi Aramco ultimately proved disappointing.
The Anglo-Dutch supermajor has decided against ploughing any further investment into the project in the Rub Al-Khali (Empty Quarter) area in south-eastern Saudi, upstream director Andy Brown told UK newspaper Sunday Telegraph.
A company spokesperson then said: “Shell has been in regular dialogue with officials at the Ministry of Petroleum and Mineral Resources and our joint venture partner, Saudi Aramco … on the Kidan project.
“Shell has decided to end further investment in the Kidan development.
“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’s immediate former chief executive Peter Voser said in early 2012 that, although the company was encouraged by the prospect of sour gas development in Saudi Arabia, the jury was still out on the outcome of its long and costly exploration campaign in the country.
“We are still drilling there,’’ Voser said, referring to the campaign in the Rub Al-Khali desert.
“Both partners ... are completing the exploration programme in order to evaluate commercial projects afterwards. I think it is too early to talk about the results, but it is one of the plays where the two companies bring a lot of technology and innovation to it, and they will be looking to a commercial development, but that takes a lot of time. It’s too early, but so far so good.’’
The South Rub Al-Khali (SRAK) joint venture between Shell and state-owned oil giant Saudi Aramco won approval in 2011 from the government for its appraisal programme for the Kidan area.
Kidan, which is rich in sour gas, is located near the 750,000 barrels per day Shaybah oil field. SRAK was to drill up to three appraisal wells and carry out studies aimed at defining development concepts for Kidan. The joint venture had committed to completing the programme by the end of 2013.
SRAK completed an initial exploration phase in May 2010 before embarking on the second phase in its contract area in the Rub Al-Khali.
One factor that could have improved the economics of the Kidan exploration area was its proximity to Shaybah, where infrastructure for both oil and associated gas is already in place.