Italy’s Eni and Spain’s Repsol have given up looking for gas in Saudi Arabia’s Empty Quarter, two sources familiar with the joint venture with Saudi Aramco said.

State-run Aramco invited international energy companies to search the vast desert of southeast Saudi Arabia for gas in 2003-2004 under tough terms that would have made it difficult for such companies to make a good return on any gas found.

But the Empty Quarter has largely lived up to its name anyway, prompting the European companies behind EniRepsa Gas Limited to abandon the search a few months ago in favour of more promising prospects around the world, the sources said.

Spokesmen for Repsol and Eni declined to comment on the status of their gas venture in the southeastern desert, known as Rub Al Khali.

South Rub Al Khali Co (Srak), the joint venture between Aramco and Royal Dutch Shell, is the only JV to report finding substantial quantities of gas in the region so far and the sulphur-rich gas there could prove too costly to be commercially viable.

The gas price terms agreed to meant the international companies involved would need to find condensate – a form of light oil that can be sold at international market prices – to cover the cost of development of even simple gas fields.

Saudi gas prices for domestic industrial use are still fixed at just $0.75 per million British Thermal Units, well below the cost of production for most gas fields that are not associated with oil.

A gas export ban means they would be unable to sell any on a global gas market which typically pays at least ten times as much.

The Empty Quarter gas exploration deals were signed at a time when major gas exploration prospects were limited and demand for the fuel for power generation was rising rapidly around the world – driving up prices.

But the global gas supply outlook has improved radically because of an unconventional gas revolution in North America – combined with major new finds in places like Brazil – which have made economically challenging exploration in the Saudi desert even less attractive, an industry source said.

Source: Reuters