Would you believe that Saudi Arabia's Empty Quarter just may be aptly named? A whole lot of natural gas apparently isn't located where it was supposed to be.
As The Wall Street Journal observed last week, the Rub al Khali, a vast and hostile desert in southeast Saudi Arabia whose name translates into the "Empty Quarter," was long thought to be stuffed with natural gas. But efforts by the likes of France's Total (NYSE: TOT ) , Royal Dutch Shell (NYSE: RDS-A ) (NYSE: RDS-B ) , and Spain's Repsol (NYSE: REP ) to produce -- or even find that gas -- have come up dry. Total has packed its bags and left the country after drilling its third dry hole.
For the most part, Saudi Arabia has prevented the big oil companies from participating in exploration and production activities in the kingdom since Saudi Aramco, its state oil company, was nationalized in 1980. But five years ago, recognizing the need for help in finding and producing what were thought to be vast gas reserves in its Empty Quarter, the nation invited foreign companies in to lend a hand. Given the perceived opportunity to get closer to Aramco, several companies gladly accepted the offer.
Ever since Saudi Arabia's petroleum assets began to be exploited in the 1930s and 1940s by the founders of what became known as the Arabian American Oil Company (Aramco), the world has looked to Saudi Arabia as a major oil supplier. But its natural gas reserves are also thought to total about 250 trillion cubic feet, putting it in fourth place worldwide, behind Russia, Iran, and Qatar, and slightly ahead of the United Arab Emirates and the U.S.
But now, with the quest for Empty Quarter natural gas revealed as a big flop thus far, I believe that most of the Saudis' hydrocarbon surprises will be negative going forward. Oh sure, there'll be good news like the recent big offshore oil discovery in Brazil, or Chesapeake Energy's (NYSE: CHK ) new Haynesville gas hit in Louisiana. But overall, mankind likely will be scrambling from now on to keep up with accelerating decline curves and Empty Quarter-type disappointments.
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