Talks give new boost to gas initiative

25 January 2002

Leading figures on both sides of the Saudi gas initiative met in mid January, injecting a measure of urgency to the scheme. ExxonMobil Corporationmanaging director Lee Raymond travelled to Riyadh for meetings with Foreign Affairs Minister Prince Saud al-Faisal and other officials on 18 January. All sides are working towards a deadline of 2 March to complete full implementation agreements (MEED 4:1:02).

Prince Saud, who is the gas initiative pointman for the Supreme Petroleum Council headed by Crown Prince Abdullah, said after the talks: 'The two sides reviewed progress in the talks and what had been achieved, and shed a light on what needs to be done to ensure the negotiations are successful and completed on time.'

Negotiations are now understood to be focusing on the quantity of gas available to the international oil companies (IOCs) in the proposed concession areas. Foreign investors say the gas in these areas is expensive to extract compared with that under Saudi Aramcocontrol, softening the projects' competitive edge. Discussion has also surrounded the tax regime to be implemented for the gas initiative.

Officials are upbeat about the 2 March deadline, after an initial target date of 16 December proved impossible to meet. 'We are confident that we will conclude the deals by the date selected,' said Finance & National Economy Minister Ibrahim al-Assaf in Riyadh on 16 January. 'Aramco and the IOCs initially had very wide negotiating positions, but their differences have narrowed. The IOCs have shown at the highest level they are interested in investing in the kingdom and Aramco has proved it wants the gas initiative to work.'

ExxonMobil leads core venture 1, involving investment of $15,000 million in South Ghawar. Its partners in the project are the Royal Dutch/Shell Group, the UK's BPand the US' Phillips Petroleum Company. It also leads core venture 2, entailing investment of $5,000 million in the Red Sea area. Marathon Oil Companyand Occidental Petroleum Company, both of the US, are its partners. Core venture 3, which involves $5,000 million of investment in Shaybah in the Empty Quarter, is led by Shell. It also comprises France's TotalFinaElfand the US' Conoco.

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