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Saudi Aramco, Shell Extend Natural Gas Drilling To 2015

By Angus McDowall of DOW JONES NEWSWIRES OCTOBER 26, 2010

LONDON (Dow Jones)–A joint venture between Saudi Arabian Oil Co., known as Saudi Aramco, and Royal Dutch Shell PLC (RDSB) to drill for natural gas in the kingdom’s empty quarter has extended its exploration license by five years to 2015.

The South Rub al-Khali Co., or SRAK, was one of three ventures launched in 2003-04 that gave international oil companies upstream access to Saudi Arabian energy reserves for the first time since 1980.

“We…requested for a second exploration period, which means a new commitment from the company including drilling wells and collecting seismic data,” a spokesman for SRAK told Dow Jones Newswires Tuesday. “The government officially approved our request of entering a second exploration period for five years.”

Saudi Arabia plans to greatly increase gas production in order to meet domestic energy demand and free up crude oil for export. However, the country hasn’t yet discovered non-associated natural gas in sufficient quantities to replace oil as the fuel for its planned electricity plants and guarantee cheap feed stock for new petrochemical factories.

Shell’s decision to continue its drilling program will allay some fears about the commercial viability of the exploration areas after the withdrawal of France’s Total SA (TOT) from the venture in 2008. SRAK is now a 50-50 venture between Aramco and Royal Dutch Shell.

SRAK said its new exploration phase would involve the drilling of three wells and the acquisition of 3,600 square kilometers of 3D seismic data and 3,000 square kilometers of 2D seismic data. It will also submit to the government an appraisal plan for Kidan area, a large sour gas field discovered in the 1960s.

-By Angus McDowall of Dow Jones Newswires; (+44) 20 7842 9386; [email protected]

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