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LUKOIL Cedes Much of Saudi Gas Exploration Block

Source: Reuters 6/15/2010, Location: Middle East

Luksar, a joint venture between Russia's LUKOIL and state oil giant Saudi Aramco, has relinquished 90 percent of a gas exploration block in Saudi Arabia, Aramco said.

Luksar relinquished most of the 29,900 square kilometre area in Saudi's vast Empty Quarter last October and has decided not to go ahead with a second phase of exploration there, Aramco said in its annual review.

Still, Luksar has started drilling the first of five appraisal wells in the part of the block it has kept to better understand two discoveries already made, Aramco said. The discoveries were made at Tukhman and Mushayib/Faydah.

Lukoil and Saudi Aramco signed the 40-year joint venture deal in January 2004, one of four deals with international companies to explore for gas in the country's vast Empty Quarter.

None of the companies have made the big gas finds that they and the Saudis hoped for, but Luksar has made two gas discoveries.

Last year, Luksar received an extension on its first phase of exploration at the concession, according to the London-based MEED magazine.

Other joint ventures include Royal Dutch Shell, China's Sinopec, Italy's Eni and Spain's Repsol.

Gas sales terms to Aramco were so poor that to make money the consortia need to find condensates - a form of light oil, which can be sold at international market prices to cover the cost of development.

That meant the firms were really looking for gas rich in condensate, rather than just gas, and that was much harder to find.

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