Skyrocketing oil prices mean that the world's leading oil producer Saudi Arabia will this year garner billions of dollars in export earnings.
But mindful that it cannot live by oil alone and of its high levels of unemployment, Saudi Arabia has embarked on a drive to lure foreign investment, especially to develop its upstream gas industry.
The strategically important upstream oil sector will remain strictly the preserve of the national oil giant Saudi Aramco.
Western energy companies, who have until August 26th to submit bids, are reluctant to disclose details until the contracts are decided, with Saudi Arabia expected to announce its decision by the end of the year.
Those on the shortlist are ExxonMobil, Chevron, Texaco, Conoco, Phillips, Enron and Occidental (Oxy) in a joint bid, Marathon, BP, Royal Dutch Shell, TotalFinaElf and Eni.
In May, Saudi Arabia announced that a dozen oil majors had made a series of proposals that would inject more than 100 billion dollars (111 billion euros) into its energy sector.
A western diplomatic source said: "There is a lot of overlap between these proposals, but you can realistically expect there will be several billions in negotiation."
Meanwhile, outside investment is being encouraged by a series of changes to facilitate foreign investment in general, including the setting up of a "one-stop shop" where companies can register.
"Basically they have leveled the playing field," the diplomatic source said.
He said the impetus for the investment drive dated back to the collapse in the price of oil to around 10 dollars a barrel in 1998.
A series of cuts implemented by the Organization of Petroleum Exporting Countries (OPEC) helped prices to rally to nine-year high levels, well over 30 dollars a barrel, earlier this year.
According to estimates from Washington-based energy specialists PFC, the surge in prices means that Saudi Arabia will in 2000 enjoy gross oil export earnings of 75.7 billion dollars, up from 47.1 billion dollars in 1999.
A report last month from Saudi British Bank said oil income could reach 160 billion riyals (42.6 billion dollars), exceeding the conservative budgetary assessment putting revenues at 157 billion riyals.
Whatever the extent of this year's oil earnings, they are unlikely to remain as high -- not least because of apparent willingness by Saudi Arabia to increase its output of crude.
Analysts attribute the compliance to pressure from Saudi Arabia's leading trade partner and the world's largest oil consumer, the United States, but also to concern that overly high prices will diminish demand by impeding growth and driving consumers to other energy sources.
In an interview in June, Saudi Arabia's former oil minister Sheikh Ahmed Zaki Yamani prophesied that the oil age would come to an end sooner rather than later.
"Thirty years from now there will be a huge amount of oil and no buyers ... The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil," he said.
His successor Ali al-Nuaimi has long stressed that Saudi Arabia was not only the "heavyweight of Middle East oil," saying in a speech in 1997, for instance, that "gas is equally essential to our continued economic growth."
Apart from the world's biggest oil reserves, Saudi Arabia has estimated gas reserves of six trillion cubic meters (210 trillion cubic feet).
Despite the logic, diversification has previously had limited success.
A spokesman for the London-based Committee for Middle East Trade said: "Although great efforts are being made to diversify, the main industry for the foreseeable future will be petroleum-based."
Another London-based analyst commented that, so far, "attempts at diversification have been limited and not very successful."
But this time could be different.
The western diplomat stressed that, by Saudi Arabian standards, the latest changes were being introduced at "breath-taking speed."
"The question is whether they will maintain the momentum, but, on balance, I think they probably will." -- LONDON (AFP)
© 2000 Al Bawaba (www.albawaba.com )