DUBAI, Sept 9: Saudi Arabia has made a last ditch bid to rescue its landmark gas investment opening, at breakpoint after a year-long battle between the kingdom and the world’s leading oil majors over commercial terms.

Riyadh has made some concessions on contract details, but Western executives said it was too soon to say whether the new stance will lead to a breakthrough in talks on the verge of collapse over the amount of gas on offer and rates of return.

A Saudi source said the modifications set out by Foreign Minister Prince Saud al-Faisal cover both the upstream and downstream elements of the projects to develop gas and build petrochemical, power and desalinations plants.

“The kingdom has made some concessions on returns on investment and the expansion of (exploration) territories,” the Saudi source told Reuters.

“This is a starting point which hopefully will put the government on the road to final agreement.”

Eight oil firms, led by Exxon Mobil and Royal Dutch/Shell, had been uncertain about their fate in the $25 billion gas project after Riyadh called time on the talks and ordered them to submit final proposals by late July.

They are now poring over the contents of a letter sent late last week by Prince Saud, a key driver of the gas opening, in which he outlined the concessions Riyadh was prepared to make.

“They (the concessions) are worth considering, but we need some time to run all the scenarios before we respond by early October, as per his request,” said a Western oil executive.

Western sources say Riyadh addressed their prime gripe, that they are being short-changed on gas, by offering access to other acreage outside the Saudi Arabian Reserved Area (SARA) if adequate volumes are not found in the acreage now allotted them.

Companies most vocal about the lack of natural gas are those in the prize package, the $15 billion South Ghawar development, led by Exxon and including Shell, BP and Phillips.

But it is as yet unclear how each of the companies will rate Riyadh’s latest proposals. And the next few weeks will see the eight firms debating the merits amongst themselves. At least one executive has downplayed the concessions as minor.

But the Saudi source said, “There is nothing called minor when you are opening your fields to foreign investment.”

The $5 billion Shaybah development, led by Shell, includes Conoco and TotalFinaElf.

The $5 billion Red Sea development, led by Exxon and including Occidental and Marathon, has been rumoured to be off the table — at least temporarily.

Industry sources say already fraught contract negotiations have become more complicated given the growing scrutiny of the US-Saudi alliance in the wake of the September 11 attacks.

Western executives in the kingdom, which straddles the fourth biggest gas reserves, say elements in Riyadh and Washington intent on harming the bond between the two countries have created a “uniquely stressed business environment”.

For oil majors seeking access to the kingdom’s upstream gas — off-limits since nationalization in the 1970s — it has been an uphill battle ever since Crown Prince Abdullah unveiled the outlines of the integrated gas scheme nearly four years ago.

Analysts say any setbacks to the kingdom’s initiative will only delay efforts to liberalize its economy and create jobs for the huge number of unemployed Saudis.

For some of the Western oil firms, Prince Saud’s letter offered relief that the kingdom was not yet making good on its earlier threat of a new race for its gas prize.

Riyadh issued a thinly veiled ultimatum to the companies in May, pushing them to compromise swiftly on commercial terms or risk facing a fresh contest thrown open to all.

“The letter made no mention of re-launching the projects, scaling down investment or removing any elements,” said a Western industry source.

Others expressed guarded optimism.

“This was not a ‘this is the end’ type of letter,” said a Western oil company source.—Reuters