Saudi signs multi-billion-dollar gas accords with eight oil majors
( 2001-06-04 10:17 ) (7 )

Saudi Arabia signed preparatory accords with eight oil majors on Sunday for three gas projects worth as much as 50 billion dollars, with ExxonMobil and Shell clinching the top stakes.

The deals, valued at around 20 billion dollars in near-term investments, are the first upstream energy projects open to foreign companies since the sector was nationalised in Saudi Arabia a quarter of a century ago.

Saudi Foreign Minister Prince Saud al-Faisal signed the accords with the chief executives of ExxonMobil, Royal Dutch Shell, British Petroleum, Phillips, Occidental Petroleum, Marathon, TotalFinaElf and Conoco.

King Fahd and Crown Prince Abdullah bin Abdel Aziz attended the signing ceremony in the Red Sea city of Jeddah at which US companies scooped the lion's share of awards, the official news agency SPA reported.

The launch of the projects is projected for next year, said Prince Saud.

The foreign minister said a six-month timeframe had been set aside for a "project definition programme" to be followed by an "implementation agreement" at the start of 2002.

The three integrated energy projects cover 440,000 square kilometers (176,000 square miles), the size of Sweden, making it the world's largest area for hydrocarbon investment.

ExxonMobil of the United States is to lead a consortium with the Anglo-Dutch Shell, BP and Phillips, another US firm, for the main prize, the South Ghawar project in the kingdom's Eastern Province.

In the second project, on the northern Red Sea, Exxon heads a consortium that groups Occidental and Marathon, the latter taking the place of the US firm Enron.

Shell was awarded the lead for Shaybah in the Empty Quarter desert of southeast Saudi Arabia, to work alongside TotalFinaElf of France and the US firm Conoco.

BP's chief executive Sir John Browne said his company's investment in the project near Ghawar, the world's largest oilfield, would amount to a quarter stake of almost four billion dollars.

The main "core venture" is worth 12-16 billion dollars, Prince Saud told journalists, without giving a percentage breakdown of stakes between the oil majors.

The projects "will lead to investment of an estimated 20 billion dollars in the near term, with possible further direct investment that could bring the total to more 50 billion dollars or more," he said.

The firms "will invest their expertise and capital, while the kingdom will provide resources, a stable environment for investment and its developments skills," he said, stressing the job-creation potential for his country.

The prince, who chaired a ministerial committee in charge of negotiations with the world's majors, already announced the winners on May 18, although Enron has since dropped out.

The Natural Gas Initiative, with work to be launched after final accords are sealed, involves exploration and production. It will supply feedstock for petrochemical industries as well as power and water desalination plants.

The projects are to be carried out in partnership with the state-run Saudi Aramco on a long-term basis for up to 30 years.

Aramco has been working to double the Saudi gas network's capacity from the current 3.5 billion cubic feet (105 million cubic metres) per day to seven billion cubic feet (210 million cubic metres) daily in 2004.

Saudi Arabia, which sits on top of the world's biggest oil reserves, has proven natural gas reserves of 220 trillion cubic feet (6.6 trillion cubic metres).

The kingdom announced in 1998 it was open to new foreign investment in its energy sector, including extraction, refineries, gas treatment, and the petrochemical field.

But development of the Gulf Arab state's estimated 261 billion barrels of oil reserves remains solely in the hands of Aramco.