Deal with oil majors within 2 months

RIYADH, Dec 24: Saudi Arabia hopes to close within the next two months a deal with foreign oil majors over multi-billion-dollar gas projects stalled for more than a year, the country’s foreign minister said on Tuesday.

“We have received a generally positive response from the third consortium,” which is led by Royal Dutch/Shell, and includes TotalFinaElf and Conoco, to develop the Shaybah fields, Prince Saud al-Faisal said.

“Only one point remains to be sorted out. We hope this point will be dealt with and, if this happens, we will sign the deal,” said Prince Saud, who heads the ministerial committee conducting talks with the foreign oil companies.

“There are indications that the response of the first consortium will be positive. We expect to reach a clear result within the next two months,” he told a press conference.

The first and second consortia to develop the South Ghawar and the Red Sea fields are led by ExxonMobil.

BP Amoco and Phillips Petroleum were chosen in the South Ghawar and Occidental and Marathon in the Red Sea group.

The Saudi government made a final offer to the companies in early September following a series of negotiations and a meeting between Crown Prince Abdullah bin Abdul Aziz and the CEOs of ExxonMobil and Royal Dutch/Shell.

The firms signed preliminary agreements in June 2001 for the projects expected to require 25 billion dollars of investments.

But talks to close a final deal have been stalled with differences on details of the commercial terms.

The projects also include water desalination, power and petrochemical plants.

Prince Saud said the projects are “huge, unprecedented in the region and highly complex,” justifying the long time the talks have taken so far.

He reiterated the government’s determination that “Riyadh will carry out these projects with these companies or others. There is no question about that.”

The projects, known as the “Saudi gas initiative,” mark the first opening in the Saudi energy sector since it was nationalized in 1981.

But they only involve gas production and development, with oil production remaining firmly a monopoly of state-owned giant Saudi Aramco.

The main stumbling blocks in the talks have been the rate of return on the investment required from the companies as well as diverging estimates on how much gas the three fields contain. The companies are pressing for an annual rate of return in the 15 to 18 per cent range, whereas the Saudis are only offering eight to 12 per cent.—AFP