Asia.News: Shell/Total venture cautious on Saudi gas hopes: “Saudi Arabia's first international joint venture gas exploration project has only a one in five chance of finding commercially viable gas reserves in the vast Empty Quarter, its chief executive said on Sunday.” (ShellNews.net) 9 May 05
Monday May 9 05
By Dominic Evans
DAMMAM, Saudi Arabia, - Saudi Arabia's first international joint venture gas exploration project has only a one in five chance of finding commercially viable gas reserves in the vast Empty Quarter, its chief executive said on Sunday.
And the earliest it could get any gas onstream would be in six years time, said Patrick Allman-Ward, chief executive officer of the South Rub al-Khali Company (SRAK).
SRAK is a joint venture of majors Royal Dutch/Shell and Total with Saudi Aramco.
Allman-Ward said despite the slim chance of success he was encouraged by initial geological data gathered in the huge desert concession bloc, about the same size as Britain.
"Now we have a bit more information I think we are much more hopeful but we are still talking overall about relatively low probabilities of commercial success," Allman-Ward told Reuters at an industry conference in eastern Saudi Arabia.
"We are still thinking in terms of 15 to 20 percent as the overall probability that we will have a viable venture in the long term in the Rub al-Khali (Empty Quarter)," he said.
"So that's a fairly big gamble."
SRAK won rights in November 2003 to seek gas in 210,000 square km (80,000 square miles) of the Empty Quarter.
Three other consortia of Russian, Chinese and European firms were awarded three smaller exploration blocs in a second round of concessions in January.
SRAK is committed to drilling seven exploration wells at an estimated cost of $400 million. The first three wells will be drilled between mid-2006 and mid-2007, Allman-Ward said.
"We have now highlighted the sweetpoints," he said, adding that those areas had a higher probability of success than was previously believed.
Alexandr Nikolaev, chief operations officer of the Lukoil-Saudi Aramco joint venture LUKSAR energy, said his company also planned to spud its first well next year and sounded a similar note of caution.
"In terms of geology, this is not a very sweet piece of the cake," he said.
CHALLENGES
As well as facing inhospitable desert climate on the surface and having to drill a long way down to any reserves -- 12,000 to 15,000 feet underground -- the joint venture faces an additional challenge in Saudi Arabia's domestic gas pricing regime.
Allman-Ward said those prices meant a purely "dry gas" discovery would be a commercial non-starter. "So we need a particular kind of success to make it commercially viable," he told the conference.
If the project did succeed, it will not happen overnight.
"With all possible, reasonable expectations of success, we believe we should be able to get gas out of a future discovery onstream by 2011," he said.
"There are ways we could perhaps make it earlier but given the scale of the fields we hope to discover, and the size of fields that make this a commercially interesting venture, we will need plenty of appraisal activity before we move to the development phase," he said.
Any gas produced will be fed into the domestic network in Saudi Arabia, which has ambitious plans to build a series of power and water desalination plants as well as mineral and petrochemical projects.
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