On May 18, the Kingdom awarded
eight major oil companies stakes in a gas development initiative, its
biggest opening to foreign investors in a quarter of a century.
ExxonMobil and Royal DutchShell have won starring roles in the
so-called “core venture” projects, estimated to require combined
total investments of $25 billion.
A government source
close to the negotiations told Arab News that with British Petroleum
dropping out of the race, the competition for the key role in the $15
billion South Ghawar project is now between Shell and Exxon.
have suggested that Exxon is in pole position to lead the project,
known as Core Venture One, with Shell a strong contender to lead Core
Venture Three — development of gas at Shaybah in the Empty Quarter.
Both super majors already have considerable investment in the
Kingdom’s refining and petrochemical sectors.
Exxon, Shell, BP
and Phillips have all been granted stakes in South Ghawar, viewed by
many as the prize gem of the gas initiative. The leader of Core
Venture One is due to get a 35 percent stake, two companies are to get
25 percent each and one firm 15 percent, the sources said.
and Conoco have all been awarded stakes in the Shaybah venture, where
the leading company is due to receive a 40 percent stake, with the
rest getting 30 percent each, according to industry sources. According
to the same official source, the competition for key role in this Core
Venture Three is between TotalFinaElf and Shell.
Exxon already has
secured the leading role with 70 percent in Core Venture Two on the
Red Sea coast while Occidental and Enron between them hold 30 percent.
By the signing
ceremony in Jeddah, the oil companies will have had more than two
weeks to pore over “preparatory agreements” which detail some
guidelines for the three core ventures and outline the percentage
stakes of each consortium, industry sources said. Fiscal and
regulatory frameworks are to be worked out during the second half of
the year, they added.
expecting tough negotiations in order to finalize contracts by a
yearend target. “This is just the start of things,” an industry
executive said. “There are going to be about five months of intense
Top oil firms
insist there are profits to be made in the Kingdom, holder of the
world’s fourth-biggest gas reserves. “The Saudis have been saying
all along that these are world-class projects with world-class
returns,” an analyst said. “The oil majors are not doubting
And they have wound
up with bigger exploration blocks than they first envisaged. “They
all asked for more exploration and they got it,” an industry
The scope of South
Ghawar project includes gas exploration in the North Rub Al-Khali, a
natural gas liquids recovery plant, gas processing, participation in
expansion of the gas pipeline network, construction of two power and
water desalination plants and two petrochemical plants.
Investment of up to
$5 billion in the Red Sea Core Venture Two includes an exploration
area in the northern Red Sea, development of the existing Midyan and
Barqan gas fields and requirements for power, desalination and
Investment of some
$5 billion in the Shaybah project includes gas exploration in South
Rub Al-Khali, development of the Kidan gas field and power,
desalination and petrochemical plants.
expect state oil company Saudi Aramco to participate in the gas
initiative. “It is unwise to think that Saudi Aramco will not be
involved,” a regional analyst said.