LUKoil Heats Up In Saudi Arabia After Promising Find

April 16, 2009
(Dow Jones ) -  Russia's OAO Lukoil Holdings said Wednesday it is pressing ahead with plans to drill two more gas exploration wells in Saudi Arabia after a recent discovery in its concession in the kingdom's massive Empty Quarter desert.

Lukoil, which is operating in partnership with Saudi Arabian Oil Co., is presently drilling two wells, Abu Nasser and Faidah-2, in its contract area in the Empty Quarter, also known as Rub Al Khali, a Lukoil spokesperson told Zawya Dow Jones by phone.

The company has completed so far the drilling of seven out of nine exploration wells it committed to drill under a contract awarded by the Saudi oil ministry in 2004. Of the seven wells, two -- Mushaib-1 and Tukman -- were successful and five were dry, the spokesperson said.

"Two wells are being drilled now after the success of Mushaib-1 and Tukman," he said.

Saudi Arabia, holder of the world's largest oil reserves, also holds the world's fourth-largest proven gas reserves at 253 trillion cubic feet, according to the BP Statistical Review.

Gas demand in the kingdom has risen rapidly in recent years, driven by a petro-dollar-fired economic boom that has seen billions of dollars being spent on industrial and infrastructure projects. It is hoped that new exploration projects in the Empty Quarter and other areas will produce more gas reserves to help meet future demand.

Last week, Lukoil Chief Executive Vagit Alekperov said an estimated 70 million tons of condensate and 300 billion cubic meters of gas reserves under C1 and C2 classification had been discovered in the company's contract area. However, the spokesperson said it is still too early to quantify the amount of commercial gas available.

"It's difficult to say how much because the still being conducted and we didn't get final results," he said, adding that reserve figures had to be approved by Saudi Aramco before production can start.

"Estimation and appraisal may take two years from 2009 but if we signed the documents with Saudi Aramco earlier we will start earlier," the spokesperson added.

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