Royal Dutch/Shell and Total have become the first western oil giants for about 25 years to be handed rights to develop Saudi Arabia's huge energy reserves.

The two European firms agreed a deal to develop gas reserves in 200,000 square kilometres in the southeast of the Empty Quarter desert.

The project - expected to involve investment of about $2bn (�1.25bn) - is a scaled-down version of an earlier plan for the companies to develop gas in the Shaybah region for use in petrochemical, power and water desalination plants.

That original scheme - and two other similar ones - fell apart after wrangling between the western oil firms and Saudi authorities over what constituted a "fair" rate of return for the investments and how much gas the developers would have access to.

Fresh tenders

No value was given for the new Shell and Total deal, but Shell will have 40% of the project while Total and the state firm Saudi Aramco will have 30% each.

ConocoPhilips - part of the team for the original project - decided not to take part, said Shell.

Other aspects of the original plan including pipelines, power plants and water desalination projects will now be put up for tender separately.

The resulting project is smaller than the vast deals often associated with Shell and Total, two of the world's top five oil companies.

But it gives them a key foothold in the country with the world's largest hydrocarbon reserves.

"It's positive from a strategic point of view," said Jon Wright, an analyst at Citigroup bank.

Saudi Oil Minister Ali Naimi called the deal "an important step and strong beginning in the area of global investment in gas exploration and production".

Mr Naimi is viewed as having been a powerful opponent of moves to open Saudi gas to foreign investment.