Gas initiative enters final strait

26 July 2002

Foreign Affairs Minister Prince Saud al-Faisal, head of the kingdom's ministerial committee for the gas initiative, on 22 July prepared to call time on negotiations with three consortia of international oil companies for $25,000 million worth of upstream and downstream projects. 'The companies will within the next few days present their final offers, based on which a suitable decision will be taken which realises benefits for the kingdom,' he said in a statement to the Saudi Press Agency (MEED 19:7:02).

The decision to look at final offers is widely expected to bring an end to the scheme in its present form, although the prince said the individual projects would be pursued, particularly in the power and water sectors.

Sources within the core ventures say they expect to hear a response to their offers by the end of August at the latest. They also insist that the submission of these proposals is just another part of the gas initiative negotiating process and that there will be more rounds of discussions, but accept there is little room to move forward. The two sides have been unable to reach agreement on fundamental areas of negotiation, including the size of acreage available to the core ventures upstream and the rate of return on downstream projects.

Circumstantial evidence is beginning to point to some projects being carried out independently, suggesting that agreements are not expected soon, or even at all. Independent water and power projects (IWPPs) are understood to be on the verge of being tendered to replace the three originally planned within the initiative. Saudi Aramcoalso recently announced plans to dramatically boost its own gas production capacity over the next seven years.

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