LUKOIL TO TAP KSA
AOG. Russian oil giant Lukoil is currently negotiating with Saudi Arabia over a deal to harvest unconventional gas deposits located in the country’s barren ‘Empty Quarter’.
Saudi Arabia has kept its vast oil reserves off-limits to foreigners, but needs natural gas to help cover domestic power demand and conserve oil for export. It invited investors a decade ago to find and produce gas in the Empty Quarter region in Saudi Arabia's southeast, also known as Rub Al Khali.
But foreign companies which formed joint ventures with state oil firm Saudi Aramco to look for conventional gas, including Lukoil, Royal Dutch Shell and Sinopec, have failed to find commercially viable deposits beneath the sea of sand dunes.
So Saudi authorities are now seeking to focus the search on unconventional deposits - very deep, high-temperature reservoirs that would require more complex and expensive technologies to exploit.
"The assumptions of the initial gas exploration agreements do not exist anymore because in spite of a decade of exploration, no commercial gas discoveries have been made," said Sadad al-Husseini, a former senior executive at Saudi Aramco.
"Therefore the exploration programme could be redefined as a change to unconventional gas exploration with higher costs and new buy-back terms," said Husseini.
Lukoil is still on the hunt for desert gas and is now evaluating the possibility of production from an unconventional deposit.
"This is tight gas. The negotiations are under way. No details on deal and future production plans yet," said a spokesman for Lukoil Overseas, which operates the group's foreign upstream projects.
"Yes, we are hopeful and will continue evaluating drilling after signing a deal," he said.
Because such production would be more expensive than conventional output, the firm is trying to negotiate a higher price with Saudi authorities in its joint venture, industry sources said.
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