'The project is moving to schedule and is still on track,' a source close to the negotiations told MEED on 11 December. 'There will be documents signed in December, but it is too early to say exactly what they will be and there will be some agreements left until 2002. We're very happy with progress.' CV3, led by the Royal Dutch/Shell Group, involves the development of non-associated gas reserves at the Kidan north and south fields near Shaybah.

The downstream aspects of the project will include an independent water and power plant (IWPP) to be supplied with associated gas from Saudi Aramco. The sour Kidan gas will be piped to the Shaybah oil field and reinjected to maintain pressure. The CV3 development consortium will also explore for new gas in the Empty Quarter. Shell holds a 40 per cent stake in CV3, and France's TotalFinaElfand the US' Conocohold 30 per cent each. Banks are already lining up for the lead arranging mandate for the IWPP.

Project officials are less sanguine about prospects of an immediate signing of agreements for CV1, incorporating the development of gas from South Ghawar and large power, water and petrochemical projects. Although the 16 December deadline was written into the memoranda of understanding signed between the government and the three development consortia in June, there is understood to be a clause permitting three extra months to clear up outstanding issues.

'We won't be in a position to sign anything detailed just yet,' says a project source. 'But we will continue to work hard to resolve the remaining difficulties.' CV1 is led by the US' ExxonMobil Corporation, with a 35 per cent stake. The group also comprises Shell and the UK's BP, which hold 25 per cent each, and the US' Phillips Petroleum Company.

CV1 contains greater gas reserves than the other two projects, but there is understood to be ongoing discussion over the quantity of proven gas on offer. Aramco already has sole rights to the most promising exploration areas in the kingdom and the consortium is understood to be keen to gain access to some of these. Sources close to the project say they doubt the quantity of proven gas on offer within CV1 as it stands is enough to guarantee a return on their estimated $15,000 million investment.

Similar questions have been raised by the consortium developing CV2, which is to focus on exploration for gas along the Red Sea coast. Gas discovered will supply two proposed co-generation plants, with a total capacity of 900 MW. CV2 is also led by ExxonMobil, which has a 60 per cent stake, and includes Marathon Oil Companyand Occidental Oil Company, both of the US, with 20 per cent each.

The forthcoming establishment of a power regulatory body and a new dedicated water ministry will support the initiative. The two new bodies will be better able to agree and oversee financial terms than the ad hoc committee now negotiating the Saudi position in the initiative, analysts say.