Saudi Arabia’s decade-long ‘Gas Initiative’ is unravelling — with considerable impact on global energy balance — as galloping domestic consumption seems eating into the exportable crude surplus of the kingdom.
Launched by the then crown prince, and now King Abdullah ibn Abdul Aziz, when during an hour long private meeting with senior executives of seven US oil majors he invited them to help develop the kingdom’s energy resources.
Initially, the three mooted gas projects focused on a $15 billion scheme to develop gas reserves in South Ghawar field and two minor $5bn ventures that involved gas production for petrochemical, power and water desalination projects.
However, internal opposition and drawn out negotiations, as well as questions about the Aramco reserve estimates, stifled the idea.
The initiative ended up with only a handful of projects, led mainly by Russian, Chinese and European firms. US oil majors, who had originally negotiated for participation, interestingly abstained. The revised gas projects entailed exploration and processing of the non-associated gas found in designated blocks in the Rub Al Khali (Empty Quarter).
In October 2003 Royal Dutch/Shell and France’s were awarded the Shaybah gas project, covering a 200,000 square kilometre. In May 2004, Russia’s Lukoil was awarded stake in 29,900 sq km Block A and China’s Sinopec was awarded stake in 38,800 sq km Block B. Italy’s ENI and Spain’s Repsol-YPF, were awarded the 52,000 km, Block C.
The entire scheme is now in doldrums.
Early last month, Shell announced ending investments in the project. ENI, Repsol and Total — have also abandoned gas search. China’s Sinopec too had reportedly suspended operations in the Empty Quarter.
