Exxon, Shell win Saudi gas projects-agency

Published June 3rd, 2001 - 02:00 GMT

JEDDAH, Saudi Arabia, (Reuters) - ExxonMobil has won the coveted lead role in Saudi Arabia's $15 billion South Ghawar gas deal, the prize gem in the kingdom's landmark gas development opening, the official Saudi Press Agency (SPA) reported on Saturday, June 2. 

 

The U.S. energy giant edged out stiff competition from rival supermajor Royal Dutch/Shell, which was awarded the leadership role in the $5 billion Shaybah gas development project. 

 

SPA quoted Saudi Arabia's Foreign Minister Prince Saud al-Faisal as saying that a ministerial committee that supervised negotiations with foreign oil firms recommended that the two companies be assigned the leading roles in the two projects. 

 

"The ministerial committee based its recommendations on what the two companies enjoy in terms of experience, competence and due to their technical and financial resources which would enable them to carry out the roles assigned to them in the best way possible," Prince Saud said. 

 

He said the committee would pass on its recommendations to the kingdom's Supreme Petroleum Council to consider them in preparations to sign preparatory agreements with the world majors. 

 

Exxon had already landed the lead position in the third gas package on offer by Riyadh, the $5 billion development of the Red Sea coast. 

 

Both Exxon and Shell already have significant foreign investments in the kingdom and feature as top customers of Saudi oil, analysts said. 

 

The kingdom on May 18 announced that eight major oil companies would get stakes in the three gas projects, worth a combined $25 billion in initial investment. 

 

Chief executives from the companies and Saudi officials are due to sign preparatory agreements on Sunday in Jeddah. 

 

Exxon, as leader of the South Ghawar development -- or core venture 1 -- is to get a 35 percent stake, while Shell and BP are to get 25 percent each and Phillips 15 percent, industry sources said. 

 

In Shaybah, or core venture three, Shell will be granted a 40 percent share, with Conoco and TotalFinaElf getting 30 percent each, according to industry sources. 

 

"There is more than enough in these projects for everyone to have a prominent role," a Western industry source said. 

 

The deals mark the reopening of Saudi Arabia's upstream petroleum industry 25 years after nationalisation. The kingdom holds the world's fourth biggest gas reserves. Oil developments remain solely in the hands of state-owned Saudi Aramco. 

 

Oil executives said many details are still to be ironed out in the gas opening, unveiled more than two years ago. 

 

Fiscal and regulatory frameworks are to be worked out during the second half of the year -- in time to meet a year-end target for signing final contracts, industry sources said. 

 

When ground is broken, it will mark the return of ExxonMobil to the kingdom's upstream industry. 

 

Prior to their merger, Exxon and Mobil had been two of the four U.S. companies -- along with Texaco and Chevron -- that managed the kingdom's oil industry under the former Arabian-American Oil Company prior to nationalisation in 1975. 

 

The scope of South Ghawar includes gas exploration in the North Rub al Khali, a natural gas liquids (NGL) 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 includes an exploration area in the northern Red Sea, development of the existing Midyan and Barqan gas fields and requirements for power, desalination and petrochemical plants. 

 

Investment of some $5 billion in Shaybah includes gas exploration in South Rub al Khali, development of the Kidan gas field and power, desalination and petrochemical plants. 

 

By Peg Mackey 

© 2001 Mena Report (www.menareport.com)

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