Shell Leaving Saudi Gas Development Project

Royal Dutch Shell (NYSE:RDS.A) is bailing out of a joint-venture natural gas project with Saudi Arabia, leaving the top oil exporter to find another way to develop its huge gas reserves.

Saudi Arabia is searching for gas to meet its rapidly rising domestic demand, but the shale gas industry has given companies many opportunities elsewhere.

"Shell has decided to end further investment in the Kidan development," the company said in an emailed statement, according to Reuters. "This was a difficult decision, but Shell remains committed to the kingdom, and we are keen to grow our investments, both in upstream and downstream."

Shell did not cite a reason for the decision to leave the Kidan area in southeast Saudi Arabia. At least three other firms — Italy’s Eni, Spain’s Repsol and France’s Total — have given up searching for commercially viable gas deposits in that region.

Saudi Arabia has one-fifth of the world’s natural gas reserves, according to U.S. government data, but production has remained limited. Kidan, for example, is rich in sour gas and near a giant oil field, but the high levels of potentially deadly hydrogen sulphide in sour gas make it more difficult to produce than conventional gas reserves.

The South Rub al-Khali Co. project, where Shell has found small amounts of gas with state-run Saudi Aramco, is keeping Shell invested in the kingdom for now.