Saudi officials said on Saturday that oil supermajors ExxonMobil and
Royal Dutch/Shell were set to win the leading roles in two coveted gas
projects in the kingdom's landmark gas opening.
Official word is expected on Sunday, when chief executives from
major oil companies are due to sign preparatory agreements for three
key gas projects, worth a combined $25 billion in initial investment.
``It is almost unthinkable -- at this point -- that they will not
be the winners,'' said a Saudi source, adding that Exxon was set for
top billing in the prized, $15 billion South Ghawar package while
Shell was poised for the lead slot in the $5 billion Shaybah gas
Riyadh last month selected eight international oil firms to
participate in its three gas consortia. But at that stage, only one
leader was revealed -- Exxon, for the Red Sea development.
Major oil companies have been on tenterhooks ever since, especially
over the hotly-contested lead role in South Ghawar.
The kingdom's high-powered Supreme Petroleum Council (SPC) is due
to meet on Sunday afternoon and most likely will endorse the
recommendations put forward by a ministerial committee, headed by
Foreign Minister Prince Saud al-Faisal.
``The leadership selection has been based on many factors such as
history of investment and technical issues,'' said a senior Saudi
government source. ``It's been a long, elaborate process -- a very
There is a slight possibility the SPC may delay the leadership
awards in order to iron out any outstanding issues, such as the timing
of the investment and the size of the program, industry sources said.
But if -- as expected -- all systems are go, an official
declaration of the core venture winners could be made during a press
conference led by Prince Saud -- slated for Sunday evening.
The gas deals mark the reopening of Saudi Arabia's upstream
petroleum industry 25 years after nationalization. Oil development
remains solely in the hands of state-owned Saudi Aramco.
``The real value, besides discovering gas and building
infrastructure, is these major oil companies reconnecting with Saudi
Arabia -- the world's biggest oil producer,'' a Saudi executive said.
``This is vital.''
But the benefits run both ways.
``The government wants to benefit from the organizational,
financial and technical capabilities of the international oil
companies -- even though Saudi Aramco can match them,'' said a senior
Saudi government official.
``But two heads are better than one -- that's why we want a group
of leading edge companies involved to improve the overall efficiency
and effectiveness of the projects.''
The next big step in the process is for the three consortia to
agree on how to work internally, the Saudi government source said.
Their plans must be approved by the kingdom.
Fiscal and regulatory frameworks are due to be worked out during
the second half of the year -- the target date for finalization of
The Saudi gas initiative seeks foreign oil companies' help in
developing the kingdom's gas reserves as well as investment in
downstream projects fed by gas supplies, such as power, desalination
``The initiative was intentionally designed to be a very integrated
project,'' the government source said.
If confirmed as leader of South Ghawar, Exxon would get a 35
percent stake, BP and Shell would each get 25 percent and Phillips 15
percent, industry sources said.
Exxon has already won the lead slot in the $5 billion Red Sea gas
package with 60 percent, while Occidental and Marathonper day of gas
and is aiming to expand gas production capacity to process seven bcf
per day by year-end 2003.
The kingdom, which is already one of the world's largest liquefied
petroleum gas (LPG) exporters, will expand petrochemical exports under
the new program, a Saudi official said.
The New York Times, Copyright
2001 Reuters Ltd©