Shell, Aramco May Develop Saudi’s Kidan Gas Field (Update1)

28/07/2009 00:00 AST

Royal Dutch Shell Plc and Saudi Aramco are conducting a study to develop the Kidan gas field in the kingdom, Al-Hayat reported, citing an interview with Aramco’s Chief Executive Officer Khalid al-Falih.

Shell, Europe’s largest oil company, drilled four wells without any result, al-Falih said. Drilling in the Kidan field showed the presence of gas that’s high in sulfur and also the presence of liquid hydrocarbons, the newspaper cited al-Falih as saying.

South Rub’ al-Khali Co., a venture between Aramco and Shell, is one of four ventures searching for natural gas in Saudi Arabia as the kingdom seeks to replace domestic use of crude oil as fuel for power. Natural gas currently represents about 46 percent of the country’s energy use, and Aramco expects half of the country’s energy demand to come from the fuel, al- Falih said.

OAO Lukoil, which has a joint venture with Aramco, had promising results from two of seven wells it drilled and received permission to continue drilling to assess the reserves and their commercial viability, al-Falih told the newspaper.

Capacity Increase

Aramco reached 12 million barrels a day of production capacity in June, when the Nuayyim oilfield started pumping 100,000 barrels a day, Shaybah expanded production by 250,000 barrels a day, and Khurais added 1.2 million barrels a day, al- Falih said.

The kingdom, which aims to maintain spare oil capacity of 1.5 million to 2 million barrels a day, now has spare capacity of about 4 million barrels a day as oil demand falls, he said. The decline in oil consumption is temporary and growth will return in the long-term, as Aramco’s refineries are ready in the next three to four years, al-Falih said, according to the newspaper.

Aramco agreed with Dow Chemical Co. to spend $200 million on engineering work for the world’s largest oil refinery and petrochemicals complex, and will make a final investment decision on the project next year, al-Falih said.

Costs for a joint refinery with Total SA dropped $3 billion to $9.6 billion and a similar drop is expected for a refinery with ConocoPhillips, Al Hayat cited al-Falih as saying.

Bloomberg