A joint venture between Royal Dutch Shell and Saudi Aramco has won approval from the Saudi government to study the possible development of Kidan area, in Saudi Arabia's Empty Quarter, the South Rub al-Khali Co (SRAK) venture said on Wednesday.
Kidan is rich in sour gas and is near the 750,000 barrels per day (bpd) Shaybah oilfield, one of the biggest in the world's top oil exporter. Sour gas has high levels of potentially deadly hydrogen sulphide and therefore is tougher to produce than conventional gas reserves.
Officials from Shell and the joint venture have said further studies are needed to understand the economics of the field before deciding whether it can be developed.
SRAK will drill up to three appraisal wells and conduct extensive studies and aims to complete its appraisal by end-2013.
It submitted its plan last year to continue exploration in Kidan, an area already discovered by Aramco years ago, after announcing in 2009 gas had flowed from Kidan.
"The delineation is very likely to prove significant volumes of additional gas reserves," said Sadad al-Husseini, an oil analyst and former top official at the Saudi oil giant Aramco.
"The kingdom and the Gulf has important sour gas reserves and these studies will facilitate the development of other similar accumulations," he said.
SRAK said it completed drilling the first of three exploration wells it plans to drill as part of a second phase of gas exploration.
One factor that could improve the economics of the Kidan exploration area is its proximity to Shaybah, where infrastructure for both oil and associated gas is in place, Michel Faure, the Chief Executive of Shell Saudi Arabia told Reuters in an interview.
Saudi Arabia, which has kept its vast oil reserves off-limits to foreigners, needs gas to help cover domestic fuel demand and conserve oil for lucrative export markets. It invited investors in 2003-2004 to find and produce gas in the desert in Saudi Arabia's southeast, known as Rub Al Khali.
So far the four consortia have failed to find the volume of gas needed to fuel Saudi economic growth or guarantee returns for investors.
The former CEO of SRAK Kamal al-Yahya told Reuters in October 2010 he saw a potential for Kidan field and the surrounding area "to provide a significant future gas resources for the kingdom."