| Saudi
Oil Minister takes natural-gas initiative
Posted: 12 May 2003
DUBAI (Dow Jones) — The Saudi government
has given its oil minister, Ali Naimi, full responsibility for concluding
negotiations with foreign companies over the oil-rich kingdom's
natural-gas initiative, the Middle East Economic Survey reports
in its edition set for release Monday.
In a May 6 letter, Naimi requested senior-level meetings with the
two lead companies, Exxon Mobil Corp. (XOM) and Royal Dutch Petroleum
Co. (RD), in the next two weeks to conclude a deal, according to
the newsletter.
The deal has envisioned international oil companies exploring for
and producing natural gas, then using the gas as a fuel for related
water desalination, power generation and petrochemicals projects.
If the talks fail, the government is determined to relaunch the
deal, MEES said.
In his letter to the lead companies, Naimi said he hoped to resolve
the lack of a positive response from them to the government's final
offer of September 2002, but added that the latest round of talks
would be based on the framework of that offer.
The final offer addressed some of the lead companies' concerns,
proposing a change in tax structure, fixing maximum prices that
the companies would have to pay for water and power in the downstream
part of the deal and raising the companies' internal rate of return.
The offer didn't immediately offer the companies more gas acreage
- the main demand of Exxon and Shell - but it did allude to the
possibility of extra acreage being made available if the gas reserves
proved to be insufficient.
MEES said the final round of discussions will force the international
companies involved to decide how much they are willing to pay to
gain a foothold in the country's lucrative oil and gas sectors.
Naimi, appointed for a third four-year term as oil minister April
30, now will conduct all further contacts with foreign companies,
MEES said.
Naimi indicated in October he had several options for reworking
the deal, the newsletter said. The whole deal could be put to international
tender; the government could work with one or more of the companies
involved; it could bring in new companies; or it could split the
packages, known as core ventures, into separate upstream and downstream
segments.
Exxon leads core venture one, with BP PLC (BP), Shell and ConocoPhillips
(COP) as junior partners.
It also leads core venture two — widely believed to be shelved
because of poor operating conditions — with Occidental Petroleum
Corp. (OXY) and Marathon Oil Corp. (MRO) as junior partners. Shell
leads core venture three, with ConocoPhillips and TotalFinaElf SA
(TOT) as junior partners.
Posted by Richard Price,
Editor Pipeline Magazine
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