DUBAI, July 7 (Reuters) - Royal Dutch Shell isending investments in a gas development project in Saudi Arabia,complicating the top oil exporter's efforts to exploit its hugegas reserves.
The search for gas has been a priority for Saudi Arabia asit struggles to keep pace with rapidly rising domestic demand.
But the emergence of the shale gas industry has opened upmore lucrative opportunities for energy companies elsewhere.
"Shell has decided to end further investment in the Kidandevelopment," it said in an emailed statement.
"This was a difficult decision but Shell remains committedto the Kingdom and we are keen to grow our investments, both inupstream and downstream."
Shell did not give a reason for the decision to shelve thejoint venture in the Kidan area of the Empty Quarter, the sea ofsand dunes that cover south-east Saudi Arabia.
Last year, industry sources said the company was set to endinvestments in the venture due to disagreements with thegovernment over terms.
At least three foreign firms - Italy's ENI, Spain'sRepsol and France's Total - have alreadyabandoned the search for commercially viable gas deposits inthat part of Saudi Arabia.
Shell has stuck it out longer in its South Rub al-Khali Co(SRAK) project with state-run Saudi Aramco after finding smallquantities of gas.
Kidan is rich in sour gas and is near the 750,000 barrelsper day (bpd) Shaybah oilfield, one of the biggest in thecountry. Sour gas has high levels of potentially deadly hydrogensulphide and therefore is tougher to produce than conventionalgas reserves.
The relatively high cost of developing challenging depositsin a country where gas sales prices are fixed at a fraction ofprobable production costs were possible reasons to discourageShell too, industry sources familiar with the matter toldReuters last year.
Saudi Arabia, which holds the world's fifth largest provenreserves of gas, expects domestic demand for natural gas - whichit uses mainly for power generation - to almost double by 2030from 2011 levels of 3.5 trillion cubic feet per year.
Saudi Oil Minister Ali al-Naimi had estimated the country'sunconventional gas reserves - those held in reservoirs that havenot been traditionally exploited - as at over 600 trillion cubicfeet, more than double its proven conventional reserves.
Saudi wants natural gas to help it cover demand forsubsidised domestic power so it can save its oil for morelucrative exports. (Reporting by Rania El Gamal; editing by Sami Aboudi and JohnStonestreet)
