Sinopec: hoping for success in Saudi Arabia after a string of disappointing results
Sinopec spins Saudi bit
China's Sinopec is sinking a seventh exploration well in Saudi Arabia to hunt for natural gas after the previous six found no flows of commercial value.
The Chinese company will complete drilling of the last well by about October, but with costs far exceeding an original projection of $300 million, a company executive told Reuters.
Under a pact sealed in early 2004 with state-run Saudi Aramco, Sinopec agreed to drill seven wells over a contract period of 10 years.
"We are drilling the last well now... One of the previous ones barely struck any gas. The rest found a small amount of flow but with no commercial value, as the agreed gas prices were too low," the official, who is close to Sinopec's overseas operations, told the news agency.
The official did not specify the agreed gas price.
"All the foreign (companies) accepted that price. But you need to strike a high-yield discovery to make it economically viable," he said.
Companies including Shell, French outfit Total, Spain's Repsol, Italy's Eni and Russia's Lukoil were drawn to hunt for natural gas in the vast Empty Quarter in 2003 and 2004.
Sinopec formed a joint venture with Aramco - Sino Saudi Gas - in early 2004 to explore a 38,000 square kilometre block in the South Ghawar region in the eastern part of the kingdom.
Sinopec owns 80% of the venture and Aramco 20%.
"The geological conditions were very tough. Each well is about 5000 to 6000 metres deep and can take up to one year to drill," said the Sinopec executive.
Saudi Arabia, which has kept its vast oil reserve off-limits to foreigners, invited investors to find and produce gas. It has reserves of 244 trillion cubic feet, the world's fourth largest.
The kingdom's gas use is set to double to 14.5 billion cubic feet per day by 2030 from 7 Bcd in 2006, its state company has said, due to a growing population and rapidly expanding industrial and petrochemical sectors.