Gas initiative marks time

19 April 2002

High level negotiations between the government and international oil companies pushing to reach implementation agreements on the three core ventures in the gas initiative have been effectively suspended, say sources involved in the financial and downstream aspects of the programme. And while technical discussions continue on core venture 1 (CV1) and core venture 3 (CV3), sources say that active discussions on core venture 2 (CV2) are no longer being pursued (MEED 22:3:02).

The US' ExxonMobil Corporation, which is heading both CV1 and CV2, is understood to be withdrawing a large number of its employees from the kingdom. CV2 is the smallest of the three projects and was supposed to have led to an up-front investment of more than $5,000 million in gas and petrochemical production and power and water projects. However, sources say the quantity of gas on offer was very low, and production costs would be likely to be prohibitively high.

Talks are now concentrating on CV1 and CV3. But the scope of discussions is purely technical, with the key issues of the ventures' rate of return and quantity of exploration acreage being deferred. The sources say CV3 is proving the least problematic.

Overshadowing the initiative is the deteriorating regional situation, which has absorbed the attention of key decision makers in the kingdom. Much of the impetus behind the gas initiative has come from political leaders, including Crown Prince Abdullah. Foreign Affairs Minister Prince Saud al-Faisal led the negotiating committee in the early stages of the programme.

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