Eni and Repsol come up empty at Rub Al Khali

European oil companies Eni and Repsol have quit Saudi Aramco’s gas exploration project in the Empty Quarter of Saudi Arabia, according to a Reuters report on Friday citing two Aramco sources familiar with the project.

The project in the Empty Quarter, also known as Rub Al Khali, was reported to be on stringent terms under which it would be difficult to turn a profit even if gas was discovered easily, due to the hydrogen sulphide richness of the ‘sour’ gas located in the area.

At the outset the prize was liquid condensate, which can be sold far mor profitably than gas on international markets. None was found by EniRepsa.

Reuters reports that the international partners in JV company EniRepsa Gas quit the project several months ago.

The project tempted several international oil companies with a rare share in Saudi Arabia’s hydrocarbons and a chance to prove themselves in front of Aramco. Eni owns 50% of EniRepsa, while Repsol YFP owns 30% and Saudi Aramco 20%.

Fixed domestic gas prices could be a major factor in Eni and Repsol’s decision to abandon the project. Saudi sells its gas domestically at subsidised rates of 0.75 per MMBtu, making unassociated gas projects hard to render economical, let alone projects involving hazardous sulphur-rich or hard-to-access tight gas.

The EniRepsa Gas exploration deal was signed in 2003, when upward pressure on gas prices due to a lack of new production sources and burgeoning worldwide demand made ambitious sour gas exploration tenable against oil investment, as crude prices were between $30-40 a barrel against $112 today.

A JV between Saudi Aramco and Shell, has reported commercial flows of gas from the quarter, but the cost of extraction may render the project uneconomical at current gas prices. meanwhile, Saudi demand for gas for power generation continues to increase at an annual rate of 6%, according to Saudi Aramco.

Aramco initiated four projects in the Empty Quarter which between them were slated to drill 27 wells, with the other two being with Russia’s Lukoil and China’s CNPC. None of the ventures have made the large payloads of condensate or gas they were hoping for.

According to Bloomberg reports, the EniRepsa JV drilled four wells in total after collecting 5,000 kilometres of seismic data.