DUBAI, June 5: Saudi Arabia told Exxon Mobil on Thursday that it had closed talks on a 15-billion dollar gas project, the biggest Saudi energy opening in nearly 30 years, oil company and Saudi sources said.

Saudi Oil Minister Ali al-Naimi sent notice in a letter to Exxon and fellow consortium members ending negotiations to develop gas in the South Ghawar field, the best upstream opportunity since nationalisation in the 1970s.

“Saudi Arabia has cancelled the Exxon-led deal for South Ghawar effective June 15,” a Saudi industry source told Reuters of the US major’s 15-billion dollar project.

In the United States, a person familiar with the negotiations confirmed that all the members of the Exxon consortium had received a cancellation notice from Riyadh.

Other potential investors in what was known as core venture one were Royal Dutch/Shell, BP and ConocoPhillips.

All four partners, bound by strict confidentiality clauses, declined comment.

The companies had wanted access to more gas than the Saudis were offering, and the two sides also disagreed over the rate of return for investments in petrochemical, power and desalination plants.

For some, this unprecedented deal was doomed virtually since the ink dried on preparatory agreements sealed two years ago between Riyadh and the world’s leading oil majors.

“This is not terribly surprising. Saudi Arabia’s mistake was not to design its initiative in a logical way from the beginning,” said Robert Mabro, President of the Oxford Institute for Energy Studies.

“And the companies appeared to be willing to do things — such as water desalination — which were not in their core business. It was surprising they did not display sufficient political sense and finesse.”

The Saudi industry source could not comment on whether Riyadh was prepared to reopen the contest for its gas reserves — the world’s fourth biggest.

Western executives also fear core venture three, the five billion dollars Shaybah development led by Shell, could also be scrapped.

The failure of the kingdom’s gas opening in its current form will deal a severe blow to Saudi economic reforms — kicked off in 1998 by Crown Prince Abdullah, the kingdom’s de facto ruler.

It has been an uphill battle for majors seeking access to Saudi gas reserves, off-limits since nationalisation 30 years ago, ever since Prince Abdullah unveiled the outlines of the industrial mega-projects four years ago.

But some Western oil executives began to fear the worst after a key ally, foreign minister Prince Saud al-Faisal, took a back seat to Naimi — who assumed full control of the talks when he was reappointed to a third term last month.

Core venture two, the five billion dollars Red Sea development, led by Exxon and including Marathon and Occidental, has been off the table for some time.—Reuters